The credit reporting companies – TransUnion, Equifax and Experian – are the three major companies that maintain credit reports. The credit reporting companies issue credit reports to creditors, insurers and others as permitted under law.
Here's an Example of How the System Works:
1. Apply for a Credit Card
When you apply for a new credit card, the creditor requests a copy of your financial history, or credit report, from one or more of the credit reporting companies.
2. The Creditor's Assessment
The creditor may use your credit report, a score, and other information you provide (such as income or debt information) to determine whether to approve your application and what rates to offer.
3. The Creditor's Decision
If you are issued a card, the creditor reports that account to the credit reporting companies, and then updates it, including your balance and payment activity, about every 30 days.
4. Your Credit Profile Updated
The credit reporting companies update your credit report as they receive new information from creditors and lenders. Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats.
Credit Report Information
Credit Report structure
Your credit report is divided into six main sections:
- Identifying information (i.e. name, address, date of birth and Social Security number)
- Consumer Statement
- Account Information
- Public Records
Late payments create a negative record. Generally, negative records will stay on your report for up to 7 years (up to 10 years for certain bankruptcy information). Positive records can remain on your credit report longer.
Your Credit Report is updated every 30 days
Your credit report is updated with new information from your creditors approximately every 30 days, to reflect your account balances and payments you make.
Check every 6-12 months
Not all creditors report to all three companies; the companies obtain their data independently, so your credit reports from TransUnion, Equifax and Experian could substantially differ. That's why it's important to check your three credit reports every 6-12 months to ensure that the information is accurate and up-to-date.
Under the Fair Credit Reporting Act, consumers are protected if there is inaccurate information on their credit reports. If you find inaccurate information on your credit reports, you can contact the associated creditor or lender directly. You can also dispute the inaccuracy with the credit reporting companies.
Know the system
Managing your credit and maintaining a good credit history can lead to better rates on major purchases. We recommend that you check your credit reports every 6-12 months, or at least 3 months before a major purchase, in order to identify potential inaccuracies and any signs of identity theft.
Routine check-ups, along with paying your bills on time, keeping your credit card balances below 35% of their limits, and correcting any inaccuracies will help ensure your credit reports are viewed in the most favorable light.This information is for educational purposes only and does not constitute legal or financial advice. You should always seek the advice of a legal or financial professional before making legal or financial decisions.
Posted in: TransUnion