The credit bureaus They are in charge of verifying the creditworthiness of a consumer. Credit bureaus receive information that is exchanged by finance companies, banks, and retailers.
From this exchange of information, a credit analysis is carried out that will result in a credit score with three-digit numbers.
That credit score is the one that affects the volume of money in a loan for which you can qualify, in conjunction with the interest rate that you will pay for that loan or credit card and even many times it also leads to the opportunity of employment or of rent of a property.
What are the most important credit agencies in the USA
In the United States there are three credit bureaus, which are the most important nationally and are the ones that dominate the credit market: TransUnion, Experian and Equifax.
The three companies once only catered to the regional markets of the East, South, Midwest, and West, but then each took over small credit bureaus and gained national reach.
In this way, at present the three companies can offer credit reports of all the people of the 50 states of the United States.
Equifax
Equifax, as a credit agency based in Atlanta, with 7 thousand employees operates in the United States and also has a presence in 18 other countries such as Uruguay, United Kingdom, Spain, Russia, Portugal, Peru, Portugal, Paraguay, Mexico, Ireland, India , Honduras, El Salvador, Ecuador, Costa Rica, Chile, Canada, Brazil and Argentina.
TrasUnion
Chicago-based TrasUnion has 3,700 employees and operates in 33 countries.
Experian
Experian is headquartered in Costa Mesa, California. While initially dealing with credit reports for people in the western United States, it has now grown into a global credit agency with 16,000 employees and operates in 39 countries with its operational headquarters in Nottigham, Sao Paulo and the United Kingdom and its corporate headquarters in Dublin, Ireland.
Calculation methods of credit bureaus
The main three credit bureaus They apply different calculation methods to obtain the credit score.
Since ancient times, credit scores were based on the FICO Score that is associated with the Fair, Isaac and Company, but in 2009 its name changed to FICO.
FICO still has the ability to obtain scores from any of the big three credit companies, for example:
Experian has the Experian-FICO risk model v2 formula.
In the case of Equifax, it patented its own scoring system with a scale ranging from 280 to 850 points, which it calls the Equifax Credit Score.
TreansUnion has a scoring system called VantageScore and a predictive scoring system known as TransRisk, created in cooperation with alternative offices to the FICO system.
Why There Is Variation Between Credit Scores
The individual or FICO score may vary from agency to agency because each is based on different calculation methods they have patented, missing reports, different information collected, and information about your debts received at different times.
Therefore, if you go to a lender to apply for a line of credit, a credit card or a loan, they will perform the credit check based on a request for a report from one of the three major credit agencies, but not will take all three into account, as you may prefer the result of only one of them.
Well, this is the way most lenders are handled by examining only one report from a single agency, except when it is a mortgage company, since a mortgage lender will examine the reports from all three agencies, since these are large sums of money and approve or deny the loan application based on an average score.
Likewise, lenders are not required to report credit activities to all credit bureaus, therefore a credit report will always be different, but if a lender reports to all three bureaus, your data will appear in reports at different times. because each of them will have collected the data at different times during the month.
Anyway, in the case of delinquency, it will not affect your credit score until at least 45 days have passed, even the credit score can change over the years and in the same agency because there is always an adjustment in the scoring method including FICO.
Keep in mind that the accuracy of credit information is not the same in the three agencies, so you should always verify your score and each report, because according to an amendment to the FCRA, which was approved in 2003 and according to the FACTA law, (Fair and Accurate Credit Transactions Act), as a consumer you have the right to request once a year a copy of your report from each agency.
Well, some creditors report only to one or two agencies and therefore there is a significant variation in the credit score from one agency to another.
So when requesting a credit score, it is calculated based on a particular credit report. You can have a strong credit report on one report and a difficult credit score on another.
Therefore, if you are denied credit because your approval was based on a bad credit score but you have a better score in another agency, you can call the creditor and ask him to take into account your best score especially if you have a good justification about bad credit score.
It is clear that you cannot control the decision about the agency that will be consulted by the investigating company. You know that credit scores can be different, but generally if you have a good score in one credit bureau, you should have a good score in the remaining two even though the numbers differ slightly.