Credit Reporting Agencies: What’s the Difference?

/ BY / Credit 101

The three major credit reporting agencies (CRAs) determine your credit score and provide it to credit card issuers and lenders. A good credit score will help you get approved for credit cards and for lower interest rates on loans; a bad score will make it harder to get card approval and more expensive to borrow money.

But did you know that the credit scores you get from the big three CRAs--Equifax, Experian and TransUnion—may vary by several points? That’s because of the way that the three credit bureaus collect information and the way that credit scores are calculated.

What the CRAs know about you

All of the credit agencies collect data about you including:

  • Personal – Your name, address, date of birth, Social Security number and employment information.
  • Credit accounts – Credit cards that you have, loans that you’ve taken out, bank accounts, etc., the balances of each and your history of making payments (either on time or late).
  • Collection information – If you’ve had debts referred to a collection agency and whether or not you’ve paid them.
  • Public information – Information about liens, bankruptcy, foreclosures, legal suits against you, etc.
  • Credit inquiries – How many times that lenders (banks, credit card companies, etc.) authorized by you have contacted the CRA to look at your credit report.

The CRAs crunch all this data in a formula that yields your credit score.

Why CRA scores vary

If the credit bureaus are generally collecting the same kind of information why do they come out with different scores? Two reasons. First, the formulas used to compute your score may vary somewhat from bureau to bureau.

Secondly, Equifax, Experian and Transunion get their account and payment information from the companies and institutions that have extended you credit—credit card companies, banks, retailers, gas companies, etc.  But not every creditor reports to all three of the CRAs.

Suppose a local retailer or a small regional bank shares information about some accounts only with Experian. Miss a payment on those accounts, and Experian is the only CRA that can factor that missed payment into your credit score. That means your Experian credit score might be a few points lower than it is with the other two CRAs.

You could also get a lower score if one credit agency has incorrect information about one of your accounts—showing that you still owe money on a loan, for example, when you’ve actually paid it off. 

When you’re applying for a credit card or a loan, you might be tempted to pay to get your FICO scores from all three agencies so that you could point a bank or a lender to the one that’s given you the highest score. Unfortunately, it doesn’t work that way. Every lender has its own system for determining which CRA they work with in your area.

The best way to keep your credit scores as high as possible is to take advantage of the free credit report that each agency must provide to you each year. Correcting any information that’s missing or incorrect could improve your credit score with any bureau—and boost your chances for credit card or loan approval.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.