Credit reporting agencies are an integral part of the credit scoring process. Whether you’re working on repairing your credit, building it from scratch, or maintaining an excellent score, it’s important to understand what these agencies do and how they work.


After learning the basics, you can use this knowledge to your advantage when trying to get your credit score as high as possible. And since loan approvals, credit card offers, and interest rates all hinge on the quality of your credit, it’s vital to know the ins and outs of the entire system.

What are credit reporting agencies?

A credit reporting agency (also known as a credit bureau) collects and records the credit information of both individual consumers and businesses.

In the United States, the industry is dominated by the largest credit reporting agencies: Equifax, Experian, and TransUnion. They are three separate companies in competition with each other and consequently don’t share information back and forth, so it’s not uncommon to see different information from each one.

The most common types of credit information collected by them include loan balances, credit card balances, payment history, account statuses, and public information.

As your personal information is collected, they can then sell it to banks, credit card companies, and other lenders that use this data to create a customized financing offer based on your credit profile. They even sell it back to you.

This process provides these financial institutions with a way to better judge your creditworthiness based on your past choices and current debt load. Insurance companies also decide what your rates will be and employers can decide whether to hire you or not based on this information.

However, it’s important to note that despite their seemingly official role, all 3 major credit reporting agencies are for-profit companies and are in no way affiliated with the federal government.

Their primary purpose is to maximize profits for their shareholders just like any other publicly-traded company.

That’s why it’s so important to monitor your own credit report to ensure the accuracy of the information there. Making sure everything is complete and correct is in your best interest, but not necessarily theirs.

How did they get started?

The big three credit bureaus, TransUnion, Equifax, and Experian, all trace their ancestry to small, local investigative companies. These early credit bureaus would collect every bit of seemingly relevant information they could about a person including employment history, marital status, age, race, religion, and testimonials.

They then provided this information to creditors who used it to determine whether or not a person was worthy of a loan and how much interest they would be required to pay.

Over time, they grew and merged until the credit reporting system moved from one with many local bureaus to the current system of three major nationwide credit bureaus.

As this happened, the three largest bureaus became so powerful that it became necessary for them to be regulated. This resulted in the Fair Credit Reporting Act (FCRA) being passed to protect you from their growing power.

How do credit reporting agencies work?

Every month, banks and other creditors send millions of records to the credit reporting agencies updating them about their borrowers. These reports include whether or not the borrowers paid the money they owed that month, if they were late making a payment, or if they defaulted on their balance.

They accumulate all of the data given to them by the banks and list it on each individual’s credit report.

While most information is updated monthly, they usually have a processing time of several weeks before everything is completely up-to-date.


No creditor or business is required to send consumer credit information to the credit reporting agencies. Most of the large lenders and credit card issuers do report regularly, but it’s less likely that smaller financial institutions take this extra step. Or, they might only report to one or two agencies.

Some companies, on the other hand, may not report your positive payments each month, but do let them know if you’ve missed a payment.

If you’re trying to get some type of financing while rebuilding your credit, ask your lender or creditor whether or not they report to all three agencies to ensure you’ll improve all three credit scores.

What do they report on?

Credit reporting agencies collect data from participating lenders and creditors, then report the information back to financial institutions on the overall credit history of credit applicants. Too many negative items on your credit reports can result in a low credit score.

You could then either be denied financing altogether or be subject to a higher interest rate and lower credit line. This can make borrowing money extremely expensive.

You can avoid going through this situation by understanding everything that they include on your credit reports. One of the most common negative items that can appear on your credit report is late payments.

They come from both credit cards and loans, like your a mortgage, car loan, student loan, or personal loan. Even if you don’t borrow money, other companies can also report late payments, such as cell phone carriers and utility companies.

It’s extremely important to make your payments on time for your bills each month. A late payment can be reported at the 30-day mark and is re-listed in 30-day increments after that.

Your credit scores will continually drop as the balance remains unpaid. However, many lenders and credit card companies also report on-time payments, which can go a long way towards building a strong credit score.

In addition to your payment history, they also import public information from the court systems. This includes bankruptcies, judgments, tax liens, charge-offs, repossessions, credit counseling, and collections. Most of these items stay on your report for seven to ten years.

It’s difficult to prevent this information from appearing on your credit report, but it’s not impossible to have it removed. A knowledgeable credit repair company can help you create a strategic plan to get negative items off your report to improve your credit scores. Click here for a list of our top-rated credit repair companies.

Do they make mistakes?

They deal with millions of data records every month and they are very prone to making mistakes. According to a report by the FTC, one in five Americans has a mistake on their credit report.

These errors can be costly, so it’s very important to make sure you see what’s being reported about you often, especially before you apply for a loan of any kind.

Due to the passing of the FCRA, you can request a free copy of your credit report from each credit reporting agency once a year in order to see if there are any mistakes listed.

If you see any mistakes on your credit report, you can file a dispute in order to get the incorrect items removed. Also, know your rights when it comes to credit reporting so you aren’t unfairly penalized the next time you need financing.

Who oversees the credit reporting agencies?

They aren’t public entities or government agencies, but that doesn’t mean there’s no government oversight involved.

Ever since 2012, the Consumer Financial Protection Bureau has been tasked with supervising the largest agencies at a federal level. The CFPB conducts exams to monitor how the agencies screen for accuracy, how they investigate consumer complaints, and other procedures.

If you have a complaint with one of them, you can contact the CFPB, the FTC, and your state attorney general. It may seem like a lot of steps but it’s best to cover your bases and get as many regulators involved as possible if there’s any potential wrongdoing.

How does the FCRA regulate credit reporting agencies?

In addition to ongoing government oversight, they must also comply with the FCRA. This federal law helps to protect consumers by requiring the agencies to investigate all disputes within 30 days.

While this does not mean the credit bureaus now make sure your reports are accurate, it does give you recourse when they unfairly report your credit history. You also have a right to a free yearly copy of your credit reports.

Additionally, the FCRA allows you to opt-out of being included on marketing lists sold by the them. You can do so by calling 1-888-5-OPT OUT or visiting

Unfortunately, the FCRA did not eradicate all the problems of the credit reporting system. The credit bureaus are still enormous corporations with enormous power.


They are also still primarily motivated by the money they make by selling your credit information. Providing you with credit reports and investigating credit disputes is something they are forced to do and not something they were willing to do on their own.

As such, the credit bureaus do what they can to avoid these practices. Knowing the history and the motivations behind them are tools for understanding the nature of the credit reporting system.

When you know the true persona of the credit bureaus, you can then see why you are granted access to your credit reports. You can also see why you have the right to repair your credit and why it can be beneficial to have a credit repair expert working on your side.

Take the time to learn about the FCRA and the FDCPA and any other laws that govern over credit bureaus, creditors, and collection agencies.

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While the FCRA has certainly made the dispute process better regulated, it can still take a lot of time and effort to get a negative item removed from your report. That’s because oftentimes, you not only need to work with the credit reporting agencies, but you also have to get agreement from the actual creditor.

If you are too busy to spend your time writing dozens of letters to credit reporting agencies and creditors, there are legitimate credit repair services that can help you out.

They help consumers deal with them and get negative items removed from their credit history.

They can also help you deal with your creditors and collection agencies. And since they have teams of lawyers with specific expertise and experience in this field, your chances of success are a lot higher.

Specifically, as it relates to repairing your credit, the credit bureaus have developed a full arsenal of tactics to keep from investigating disputes. These tactics range from general propaganda to strong-arm tactics to methods of questionable legality.

How many times have you heard that the only way to improve your credit is to wait seven years, and any company who offers to repair your credit is a scam?

It is surprising so many people believe some or all of these statements when not a single one of them is true. Misinformation is the best friend of the credit bureaus as it dissuades so many people from even attempting to dispute their credit. No wonder they are so quick to promote this flawed perception.

How can I contact them?

You can find their contact information on this page: Credit Bureau Contact Information