Your credit score is a result of the information that has been reported on your credit report. However, most consumers are unaware of exactly who calculates their credit scores.
What are the Credit Bureaus?
In the United States, there are 3 major credit bureaus: Equifax, Experian, and TransUnion. These 3 companies will gather and collect financial information about you and turn that data into a credit report. A credit report includes details and information about your current and past debts, accounts (whether open or closed), credit inquiries, and bits of personal information. The companies will input your data into an algorithm to calculate your credit score.
How Do The Bureaus Collect Information?
The bureaus should be regarded more as information collection agencies rather than credit score producing companies. The credit bureaus get your financial information from your lenders, banks, credit unions, credit card companies, and more. An “agreement” exists between the financial institutions and the credit bureaus since the financial institutions will provide data to the bureaus in exchange for reports they can use to evaluate potential borrowers.
What are Credit Reports For?
Credit reports are essential for banks, lenders, and even landlords to make decisions with. A credit report is used to evaluate the “worthiness” of a person to be able to borrow funds and repay them. If you apply for a loan from a lender but your credit report shows that you have missed multiple payments in the past, a lender may become reluctant to lend to you.
Where Can I Get my Report?
You are legally entitled to receive your credit report for free, once per year, from each of the 3 main credit bureaus. This means that you can receive a credit score from one of the bureaus for free every 4 months. The government mandated website annualcreditreport.com was established to provide Americans with convenient access to their scores. You can also receive a free copy of your credit score and report here.
Your credit report is essential to being able to borrow money easily and inexpensively. Often times, many consumers will notice errors on their credit reports, where a debt or late payment has been recorded, even though it may have never happened. If you check your credit report and see an error, be sure to file a dispute with the credit bureaus. The bureaus will have 30 days to respond, or the entry must be removed.