What Are Credit Report Agencies?

These days, anyone who has applied for a credit card, car loan, mortgage, or even a job, has come across the term “credit report agencies.” What are these agencies, and how do their activities affect everyday consumers?

There are three major credit report agencies: Experian, TransUnion and Equifax. These companies supply credit reports to banks and other potential lenders, based on information provided by businesses, utilities, landlords, lending institutions and other “information providers” who subscribe to their services. A credit report helps to determine not only whether you qualify for credit or a loan, but the amount of money available to you, and the interest rate you’ll pay.

Credit report agencies assist lenders who want to determine credit risk. Banks and other lenders calculate an interest rate based on factors such as the life and amount of the loan, and “determinable risks” such as the FICO score.

So, the credit bureau does not make decisions about your credit – they simply make information available to the people who do make those decisions.

Credit scoring determinants need not be mysterious or daunting. . Credit report agencies set your credit score between 300 to 900. Each agency uses its own secret formula, but some ingredients are standard. For instance:

35 percent is based on your bill-paying history; each time you are late or default, counts against you; 30 percent is based on your debts, such as car loans, mortgages, retail card debt and the like;
15 percent is based on how long you have been in the credit report agency system; a new consumer will have a lower score in this category than someone with 20 or more years of getting and paying off credit;
10 percent is based on the type of credit you maintain – how many credit cards you hold and what your available credit is;
10 percent is based on the number of inquiries the credit report agency has had for you in the past year. An inquiry means that you have applied for credit, or authorized someone else to review your report.

It is a smart move to keep track of your credit report maintained these agencies. The credit report agencies catalogue your payment history for the past seven years. Reports note your debt load, and any judgments such as bankruptcy or foreclosures. Such factors, together with your debt-to-income ration, provide a FICO score. Ask the credit report agencies for a free copy of your report once a year.