What is Credit Bureau?

Why Credit Bureaus Matter

Credit bureaus are the gatekeepers of your financial reputation. Every time you apply for a credit card, mortgage, auto loan, or apartment, the lender or landlord pulls your credit report from one or more of the three major bureaus. A Federal Trade Commission (FTC) study found that approximately 1 in 5 consumers had an error on at least one of their credit reports, and 1 in 20 had errors serious enough to result in less favorable loan terms. Because the information in your credit reports directly determines your credit scores and borrowing costs, understanding how bureaus work and regularly reviewing your reports is essential to your financial health.

Real-World Example: What Credit Bureaus Track

Here is a breakdown of the types of information the three major credit bureaus collect and how long each stays on your report:

How Credit Bureau Data Becomes Your Score

A credit score is calculated by applying a scoring model, such as FICO or VantageScore, to information in a credit report. Credit bureaus compile reports from information supplied by lenders and other sources, and they may also provide scores based on those reports. A score can differ because of the bureau's data, the scoring model and version, or the date it is calculated. Not every lender reports to all three bureaus, and information is not necessarily updated at the same time.

When to Check Your Credit Bureau Reports

You should review your credit reports from all three bureaus in these situations:

• Regularly as a routine checkup: free weekly online reports from all three nationwide bureaus are available through AnnualCreditReport.com
• Before applying for a mortgage: Check all three reports 3-6 months in advance to dispute any errors
• Before applying for an auto loan or credit card: Verify your information is accurate and up to date
• After a data breach notification: If a company where you have an account reports a breach, check for unauthorized accounts or inquiries
• After paying off a debt: Confirm the creditor reported the account as paid or settled
• If you suspect identity theft: Look for unfamiliar accounts, addresses, or inquiries you did not authorize

Common Credit Bureau Mistakes

These errors can cost you money or leave you vulnerable to identity theft:

• Never checking your credit reports: An FTC study found 1 in 5 consumers had errors. You cannot fix what you do not know about
• Assuming all three reports are identical: Lenders may report to one, two, or all three bureaus. Always check all three
• Paying for credit reports you can get free: AnnualCreditReport.com is the only federally authorized source for free reports. Avoid paid services that claim to offer 'free' reports with hidden subscriptions
• Not disputing errors properly: Send a dispute to each bureau showing the error and to the company that supplied the information. A bureau generally has 30 days to investigate, or up to 45 days in certain cases, such as a dispute after receiving a free annual report or when you provide additional relevant information
• Confusing a credit report with a credit score: Your credit report is the raw data; your credit score is a number calculated from that data. The report is free; some score services charge a fee
• Ignoring fraud alerts and credit freezes: Both are free tools to protect against identity theft. A freeze prevents new accounts from being opened in your name