Top 3 Credit Secrets of the Credit Bureaus

January 19th, 2009

Do you understand what the credit bureaus are for? A credit bureau, also known as a Credit Reporting Agency or Consumer Reporting Agency, is mainly a central warehouse of credit and collection records, payment history and certain legal information about you the consumer and also has all this information on businesses. Equifax is the one bureau that is a publicly traded company. Experian and TransUnion are just privately held companies.

These records are sold (emphasis on sold) to credit grantors and lenders whenever a consumer or business tries to apply for credit. The three major U.S. credit bureaus are Equifax, Experian and TransUnion. Even Dun and Bradstreet Corp is considered a credit bureau that is known for reporting business credit information exclusively. And don’t ever forget about the up-and-coming Innovis.

The credit bureaus store over 1 billion consumer and business records. About 2 billion individual credit transactions are entered into those records every month. That’s a lot of information to manage correctly don’t you think?

As the credit bureaus are trying to manage all this activity, there is always a chance that a credit record will probably have errors. Remember, it has been shown that about 80% of all reports contain errors.

That’s why the U.S. Government passed the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act of 2003 (FACTA). These acts set out the requirements for credit bureaus to maintain fair and accurate records, provide a way for consumers to view those records, and tell them how to respond to consumer complaints of inaccuracies.

The credit bureaus DO NOT make their money by researching your disputes. Researching your disputes costs them time, money, and resources to investigate them. Remember, they make most of their money by selling information to lenders, insurance companies, utility companies, credit card issuing banks, and even employers.

Here is the first credit secret of the credit bureaus:

The Credit Bureau Reports – 92 Scores

You can have up to 92 different scores at any given time. Reports and scores are created “on the fly” whenever they are requested by you, a creditor, or a lender. There can be up to 23 different scores for each of the credit bureaus. Yes, this does include Innovis.

Your credit score will vary depending on who pulls the report and which profile has been applied to you. And usually the score you see if you request it from a major reporting bureau or an on-line service WILL be different – and usually higher than the score you get from a mortgage broker.

The reason for this is that when you pull a report from an online service for example, there are usually about 18 elements of identification that have to match exactly. You are more likely to get accurate information if the majority of information matches up.

When the credit bureaus pull a report for a lender, only about 9 elements have to match. So, more errors and erroneous information will appear on your score – which can lower your credit score.

It has been speculated that the credit bureaus provide these different and lower scores because if they are reporting lower scores to lenders, then they feel that they would be less likely to be sued by lenders if the borrower defaults on the loan.

Wow. So are they protecting you? Or just protecting themselves?