When thinking about credit reports and credit bureaus, many people immediately think of the three largest credit reporting agencies. These three are TransUnion, Equifax, and Experian. While some there are some alternative credit bureaus, the three mentioned above are just the largest and therefore dominate the market.
Are Credit Bureaus Run By The Government?
It is a common misconception that credit bureaus are in some way a federal agency. All credit reporting agencies are actually for-profit businesses. They all must follow certain laws and regulations, but each and every one is regarded as a private business. The Better Business Bureau has given ratings for each of these three major credit agencies. TransUnion and Equifax are both rated an A-, while Experian only receives a B+.
Equifax is the oldest of the three major credit bureaus. Founded in 1899, it began by selling consumer data to financial institutions, government agencies, insurance providers, and retail companies. In 1999, Equifax began selling information to the general public including credit reports and scores, as well as offering credit monitoring.
TransUnion became the next big credit bureau, beginning as a small holding company for railcars in 1968. The company expanded into credit reporting in 1969 after acquiring the Credit Bureau of Cook County. TransUnion began very small and humble. At their Cook County location, they used seven-drawer filing cabinets to store credit reports. This grew to 400 filing cabinets to storing nearly four million records before they modernized their system. Now, the company is as large as major publicly traded companies.
Last, but not least, Experian was founded in 1996. Experian is the only one of these companies that did not get its start in the United States. The headquarters office is actually located in Dublin, Ireland. Experian was formed when a British retailer acquired TRW Information Services. Experian focuses on credit, analytics, and marketing and consumer services.
Lawsuits And Violations
Each of these major bureaus has seen its fair share of opposition and scrutiny. There are reports for all three agencies regarding violations of the FCRA (Fair Credit Reporting Act). There are also many other controversial issues these businesses have faced.
Equifax is actually believed to have changed its name to escape some of the bad press it had acquired when it was previously known as the Retail Credit Company. Reports in the 60s and 70s suggest the company was storing individuals’ political leanings, marital strife, and sex life. This led to the passing of the 1970 Fair Credit Reporting Act. Many believe this ultimately led to the Equifax name change. Equifax was recently in the news for a major data leak, which has caused many people to fear they will need credit repair if their details have been stolen.
TransUnion has also been met with various lawsuits and penalties throughout the years. TransUnion, alongside Equifax and Experian, was fined 2.5 million dollars by the Federal Trade Commission in 2000. TransUnion has lost multiple other consumer suits over the years. Many of the lawsuits relate to fair credit reporting practices not being upheld.
Experian has also met many issues over the years. Consumers with their first credit card experiences have felt angry concerning the company’s advertisement of free credit reports, in which individuals are actually enrolled in a monthly paid subscription service that is difficult to cancel. Experian employees brought to light many issues with Experian adhering to policies restricting full investigations of consumer disputes. These former employees were interviewed in February 2013 by 60 Minutes for a piece regarding the inaccuracy of credit reports.
Why Are My Credit Scores Different On Each Bureau?
Many people question the inconsistency in scores between each of these credit bureaus. Since these credit reporting agencies are independent, private businesses, they are in competition with one another. They each have their own methods for collection, rating, and scoring individual data. They do not all use the same processes to compile an individual’s score; therefore, differences between agencies is quite expected. In addition, the agencies do not all receive the same information. Some companies may send information to only one or two of the agencies.
In 2006, the three major credit bureaus joined together to offer a new type of credit score. This began to be referred to as the VantageScore. The first model, VantageScore 1.0, was introduced in 2006 with the most updated model being VantageScore 3.0 released in 2013.
VantageScore is being developed to be a better credit scoring system that the big three credit bureaus will share, which may lead to their services becoming more homogenized.