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What is a Credit Bureau?

What Is a Credit Bureau, and How Does It Work?

Updated on November 29, 2022


A credit bureau is an organization that aggregates data on individual consumers and sells that data to lenders. These bureaus allow potential lenders insight into the creditworthiness of a potential debtor.

Credit bureaus gather information from a wide array of sources. Different financial institutions report data to credit bureaus. These mainly include banks and credit unions but extend to auto lenders, credit card issuers, and online lenders. Additionally, credit bureaus explore other available public records ranging from court orders to property records.

The major credit bureaus in the United States are Equifax, Experian, and TransUnion. Each of these organizations calculates credit reports slightly differently, meaning it's common to get varying results from the different bureaus. Many potential lenders use an average of the three scores to get the most holistic understanding possible.

While this may seem complex, the good news is that all three bureaus are looking for similar patterns when they analyze your credit history. For example, they want to see on-time payments, a healthy credit mix, and low utilization on your lines of credit.

This article will cover the basics of how credit bureaus work, why they're essential, and what is their primary function.

Why are Credit Bureaus Important?

Lenders must carefully consider credit risk when deciding whether or not to lend money to an individual consumer. Lenders that are too lax with their requirements risk handing out funds that are not repaid, which is problematic for the organization. On the other hand, lenders that are inflexible with funds miss opportunities and lose potential clients.

Striking the correct balance is, therefore, a crucial task. Specific, independent data aggregation and reporting become immensely valuable. Credit scores provide objective metrics by which lenders can make decisions.

What are those metrics, exactly? Lenders (and, by extension, credit bureaus) are eager to see that you are not utilizing a dangerously high percentage of your existing credit. They want to know that you are paying all your bills on time. And they want to see that you have maintained a healthy mixture of account types over a long period.

It's worth noting that consumer reporting agencies do not grant or deny loans. Instead, they calculate creditworthiness using payment history and credit information. Most lenders take into account a wide range of factors. Sometimes factors such as income, savings, and existing debts can play an even more significant role than credit scores in these lending decisions. However, credit scores are a common influence on lending decisions.

How Does a Credit Bureau Work?

Credit bureaus receive reports from various institutions that allow them to build a comprehensive portrait of any individual consumer's financial accounts. Using a variety of factors found in your credit history, these institutions calculate an overall credit score, mainly ranging from 300 to 850. The relative value of each score can vary depending on the agency reporting and the lender's criteria. However, as a general rule:

300 to 499 is considered Very Bad
500 to 600 is considered Poor
601 to 660 is considered Fair
661 to 780 is considered Good
781 to 850 is considered Excellent

As we will discuss later in this article, your exact score can depend on which bureau you ask. It can also depend on factors such as the circumstance in which you are applying for credit. FICO will calculate a slightly different value for your score based on personal elements, such as what type of asset or loan you are attempting to get.

What are the Three Main Credit Bureaus?

What are the Three Main Credit Bureaus?

As noted in the introduction, the three main credit bureaus in the USA are Experian, Equifax, and TransUnion. These companies coordinate with lenders across the country to gather and organize an up-to-date database containing information on the credit history of millions of Americans. This information empowers companies to understand the risks associated with any loan they may consider giving. It also allows consumers to take advantage of credit by building a positive score. (Though if you do not currently have a good credit score, low credit options are available for you, too.)

Which Credit Bureau Is Most Often Used?

Of the three main credit bureaus, Experian is the largest. However, Equifax and TransUnion are frequently used and significant credit bureaus. You will want to keep an eye on all three major credit reporting agencies to track your credit score and monitor the reports for errors. Together, these three bureaus are the most used and best-recognized agencies in the United States. And nearly any type of loan you try to get will take your reports from these agencies into account one way or another.

What Does a Credit Bureau Do?

Institutions such as Experian, Equifax, and Transunion are data collectors. They coordinate with banks, credit unions, and other lending institutions while researching publicly available information to form financial overviews of individual consumers.

Credit Bureaus then sell that information to prospective lenders who want to make educated choices regarding how much money they lend to any individual. (And whom they should not lend to in the first place.)

What Information is Collected by Credit Bureaus?

What Information Is Collected By Credit Bureaus?

A few pieces of information regularly analyzed by credit bureaus include:

  • Payment history
  • Account balances
  • Account open dates
  • Date of the last activity
  • High credit on an account
  • The credit limit on each account

Agencies such as Equifax also collect information on debt collections and bankruptcies.

How Does The Credit Bureau Get Information?

Credit bureaus have ready access to information on your financial accounts because lenders readily share that info. Lenders voluntarily comply with these requests because the credit bureaus have a longstanding reputation and because lenders rely on the credit reports that Bureaus receive.

Data regarding on-time payments, account balances, etc., then get aggregated into a final score based on all this information. FICO and VantageScore are the most common scoring systems, which have slowly converged into increasingly similar algorithms. Both systems now weigh consumers on a scale of 300 (Low) to 850 (High) in terms of credit scores.

Why Do I Get Different Credit Scores for Each Bureau?

Some consumers need clarification when they first check their scores and see that different bureaus have different scores. Relax: this is a common occurrence. This can happen for a few reasons.

  • Different bureaus may keep different schedules for collecting and aggregating information, meaning they base your scores on slightly different windows of time.
  • Some lenders may report to one or two credit bureaus, while others report to all three.
  • Bureaus can use different scoring models which calculate your score a little differently.

In addition to differences between bureaus, different lenders may also use slightly different criteria. FICO, for example, offers many distinct models for evaluating creditworthiness. They may provide a score for auto lending and place more importance on someone's auto payment history over their on-time credit card bill payments, for example.

Discrepancies between bureaus are often no cause for concern. However, this topic does underscore the importance of keeping tabs on your credit reports. By paying attention to the individual line items in these reports (which you can request for free from each of the bureaus), you can stay alert for any false information.

Incorrect information on your credit report can arise for several reasons. Identity fraud is one of the most pressing issues. Though simple mistakes can also occur, they must be dealt with swiftly to avoid headaches.


Credit scores can seem confusing or even overwhelming. There are multiple bureaus and thousands of potential lenders, each of which has specific criteria for evaluating creditworthiness.

The good news is that many options are available for anyone looking to borrow money or get cash fast. Though having a good credit score is always helpful, it's not strictly necessary. And irrespective of whether you require funds, you can try to boost your credit scores. Some lenders offer loans to those with poor credit.

One option you may wish to consider if you are looking for loans you can obtain with any credit is Cash 1 Loans. We offer various options, from title loans to installment loans to lines of credit. Our short-term loans can help you get cash in your pocket quickly, so you can cover your expenses and get back to focusing on the things that matter most.