How Do Credit Bureaus Get Your Information?
, by Rob Kaufman
The top three credit bureaus (also known as credit reporting agencies) are Experian, Equifax and TransUnion. When you're applying for credit, lenders depend on the data provided by these bureaus to make their decision whether or not to lend you money. So where does this data come from in the first place?
Most of us establish credit over time through things like:
Opening bank or credit union accounts
Applying for and using retail, gas and other credit cards
Getting an auto loan
Taking out a mortgage or line of credit
The length of your credit history (the credit you establish over time) makes up 15% of your FICO® Score. It's an important factor that creditors take into consideration when deciding if you've had credit long enough to trust you with their money. This isn't the primary focus of this article, but it's essential knowledge to have.
So... once you've established credit, your creditors (see those mentioned above), report the details of your credit activity to the bureaus. If you manage your credit well that positive information will be reported to the credit bureaus and reflect positively in your credit file and subsequently your FICO® Score. The same goes for negative information. For instance, if you owe very close to your total allowed limit on a credit card, that information will also be passed on to the bureaus. This is part of the "Amounts Owed" factor of your FICO® Score which makes up 30% of your total score - just one of the reasons to monitor your spending.
Timing is Everything with Credit
Your credit files can change every day. That's because, as you open new accounts, pay your bills, close accounts and so on, the bureaus continue to collect information and activity from creditors and lenders. This collection alone changes the data in your files.
In addition, some lenders provide their information at the start of the month, others in the middle and some at the end. That means, not only will the information change on different days at different bureaus, but the information at each bureau may not match because it was received at different times.
In answer to the original question, "how do credit bureaus get your information?" it pretty much comes down to specific lenders and their processes regarding customer credit activity. Once they report that information to the bureaus, the bureaus provide the information in the form of a credit report to the company or person who requested it.
All Lenders are Not the Same
Something to note when doing research on your credit bureau information is that lenders are not required to report information to the credit bureaus. Generally, most major banks report to all three bureaus. However smaller regional banks and credit unions may only report to one or two of the bureaus... or to none at all. The same goes for credit cards, but more often than not, the credit card companies will report your activity to at least one of the credit reporting bureaus.
It's for this reason (and others, like identity theft and out of the ordinary inquiries), that you should always monitor your credit reports. It helps you ensure that the information they contain is correct and will also give you a look into how you are perceived by lenders. This way there won't be any big surprises when you apply for a loan, an increased line of credit or decide it's time to ask for a decrease in your credit card interest rate.
Check out myFICO forums to see how others have managed to keep an eye on the information lenders send to credit bureaus.