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Topics addressed on November 14, 2007:
The difference between the three national CRAs and credit scores
What are the differences between the three national credit reporting agencies: Experian, Equifax and Trans Union? Is the credit reporting different, and why are the credit scores different?
Experian, Equifax and Trans Union compete to sell credit reports and ancillary services. These companies collect, store, and maintain information covering the entire United States and Puerto Rico, so they are referred to as the national credit reporting companies. Innovis is a fourth major company that has entered this market, but it does not yet have the same scope as the other three.
A sometimes confusing fact is that there are also a few local or regional credit reporting companies affiliated with one of the three major companies. They collect, store, and maintain information in the same manner and in the same database as the national credit reporting company with which they are affiliated, so there is often little or no visibility to the fact that the credit report is from an affiliate rather than the major company. However, there are fewer and fewer local credit bureaus because they are being acquired by the national credit reporting companies and merged into their systems.
Another factor complicating the industry is that recent legislation requires the national credit reporting companies to share requests for security and fraud alerts and to maintain a jointly operated Internet site to allow consumers one point of contact to request free credit reports each year.
It is certainly an unusual situation for competitors to work together in such a manner, but the national credit reporting companies have worked together for many years to set consumer assistant standards to best meet consumer needs and to eliminate some confusion by having consistent practices. Certainly, not all services are the same because the businesses are competitors and their systems, processes and policies are developed independently, but there is a shared feeling that we don’t want competition to hinder consumer assistance.
While some consumers would prefer the simplicity of having only one credit report, the fact that there is strong competition is considered a positive by many in that it keeps all of the companies working very hard to provide the most accurate credit reports, the best customer service, the lowest possible pricing, innovative and effective tools and additional services to enhance customers’ decision processes.
Credit scores are different on each system in part because the national credit reporting companies are competitors with different computer systems. Because they compete, some businesses choose to report only to one or two of the companies, but not all of them. The differences in the data produce different scores.
Most scoring models are developed using data from one system at a time, so there can be variations in the numbers even when the credit reports appear to have the same data. The VantageScore is the only score that was developed to produce exactly the same score on the same data across all three databases.
The other important reason is that there simply are many different credit scores. So, it is possible to have different credit scores because the credit scoring systems used to calculate the scores treat the information differently, or simply have different scales.
You can find much more about credit scores in my previous columns.
Thanks for asking.
- The "Ask Experian" team