The very fact that there are three completely separate, important credit reporting bureaus (Experian, Equifax, and TransUnion) by definition means that they will be different. Credit bureaus are simply the firms that collect and store different kinds of credit information about you, your financial accounts, and your payment history.
They compile all of this information in order to build out your credit reports and determine the resulting credit scores. People mistakenly tend to throw the big three credit reporting bureaus into a single category, yet they compete against each other as independent entities for various creditors’ business. Creditors come to them for your credit reports and scores to assist them in making responsible lending choices.
The 3 Main Sources for the Credit Bureau Data
- Creditor-reported information to the bureaus – Banks, lenders, and creditors will report information on their customers and accounts to one or more of the big three bureaus. The bureaus call these creditors “data furnishers” in this capacity.
- Information that the bureaus buy or gather themselves – Credit bureaus actually buy some data. LexisNexis sells public records as a consumer credit bureau itself, and the credit bureaus may purchase it to have the data when creating your credit report. This could include bankruptcy records, the only real public records information that counts on credit reports since the sweeping changes of 2017/2018.
- Information the bureaus share between one another – The big three bureaus may be fierce competitors, but they do share information with each other sometimes. If you were to set a fraud alert or initiate a credit freeze with one of them, then they must share this alert with the other two bureaus.
You will see the differences between the three bureaus yourself if you compare your three credit reports. These can be important. Some creditors do not report to all three credit bureaus. Others may not report regularly to all three, or to any of them.
This is how you can end up with sometimes substantially different credit scores from varying credit reports. It results from the variations in data that each report contains.
The 3 Types of Consumer Credit And How You Can Access Them
There are actually three different categories of consumer credit today. These are revolving, instalment, and open. Each of them will affect your credit score in different ways. Possessing a variety of these credit types improves your credit score (in the 10 percent credit mix component). We will consider each of these three types and how you can access them next.
Proves to be among the most frequent kinds of credit accounts for consumers. This type of credit takes the form of a line of credit against which you can draw (or borrow) whenever you need it up to the maximum amount, or credit limit. This limit represents the maximum that you can utilize at any given point.
The most frequent types of revolving credit are credit card accounts and HELOCs, or Home Equity Lines of Credit. These generally require you to make consistent monthly payments and involve interest charges if you choose to carry a monthly balance (after the payment date).
Involves a preset, lump sum loan amount that comes with a regular and fixed schedule of repayment. There are many different loans that fall into this category. Some of them are mortgages, car loans, student loans, and personal loans. This is a second most common form of consumer credit.
The third type of credit is a rarer form called open credit. A great number of individuals do not have it on their personal credit reports at all. Open credit accounts are ones against which you are able to borrow up to a maximum cap. Yet they are different because you must pay them back in their entirety every month.
Open credit is most commonly connected to charge chards (not traditional credit cards). Many store accounts used to be charge cards, though most of these have converted to revolving credit nowadays. American Express is the greatest single remaining example of open credit these days. Any balances you charge on AMEX must be repaid by the statement due date each month.