Understanding Credit Bureaus
In the United States, there are three major credit bureaus: Equifax, Experian, and TransUnion. Each of these agencies collects and maintains consumer credit information, creating credit reports that lenders use to assess creditworthiness.
The Big Three Credit Bureaus
While all three bureaus collect similar information, slight variations can exist between their reports due to different reporting timeframes and information sources.
FICO Scores and Their Dominance
The FICO Score is overwhelmingly the most common credit scoring model, with approximately 90% of lending decisions utilizing FICO Scores. Different industries often use specific FICO Score versions:
- FICO Score 8 - Most widely used across all lending types
- FICO Score 2 - Common for mortgage lending
- FICO Auto Score 8 - Specifically for auto loans
- FICO Bankcard Score 8 - Used for credit card decisions
The FICO score ranges from 300 to 850 and is calculated based on:
- Payment history (35%)
- Credit utilization (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
Which Reports Do Lenders Use?
Usage by Industry
| Industry | Most Common Bureau |
|---|---|
| Mortgage | All Three |
| Auto Loans | Experian |
| Credit Cards | Experian/TransUnion |
| Personal Loans | Experian |
Mortgage Lenders
For mortgage applications, lenders typically use a tri-merge credit report, combining information from all three credit bureaus for a complete picture of a borrower's credit history.
Auto Loans
Auto lenders frequently prefer Experian due to its detailed auto loan history data, though they may pull reports from multiple bureaus.
Credit Cards
Credit card issuers often rely on a single bureau, with Equifax and Experian being commonly used, though preferences vary by issuer.
Why Do Lenders Use Different Reports?
Lenders may choose different credit reports based on several factors:
- Regional Preferences: Some lenders may have regional preferences for certain credit bureaus
- Industry Standards: Different industries may favor one bureau over another
- Data Accuracy: Lenders may have experienced better data accuracy with a particular bureau
- Cost Considerations: The cost of pulling credit reports can influence choices
Impact of Multiple Credit Checks
Multiple credit inquiries for the same type of loan within 14-45 days
typically count as one inquiry for scoring purposes.
This rate shopping provision helps consumers compare offers without damaging their credit scores.
How to Prepare Your Credit Report
- Check All Three Reports: Review your credit reports regularly through AnnualCreditReport.com
- Dispute Errors: Address any inaccuracies promptly with the respective bureau
- Monitor Your Credit: Use credit monitoring services to track changes
- Improve Your Score: Pay bills on time, reduce debt, and avoid opening too many new accounts
You can also check your credit report and FICO credit score through services like Credit Karma or Credit Sesame.
While Experian reports may be most commonly used, maintaining good credit across all three bureaus is crucial for optimal lending opportunities. Each lender has its own preferences and may use any combination of credit reports in their decision-making process.