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There are three main credit reporting agencies (CRA) operating within the United States. Each one is a for-profit company responsible for recording and compiling your credit history.
A business that has a legitimate reason to request a credit check can contact one or more of the big three CRAs to pull your credit report. Some common examples of businesses that will make a credit inquiry before approving you are those offering financial services like loans and lines of credit, credit card companies, property rental agencies, and more.
Because different businesses rely on different CRAs, it can be helpful to know which report is most likely to be pulled beforehand. That way, you can check your own credit report before the business does to make sure there aren’t any errors or problems you need to resolve.
Are You Credit Worthy? The Five Key Factors
There are five key areas that CRAs pull information on to compile an accurate and up-to-date credit score.
- Payment History (35 percent): Have you had any overdue bills recently? How overdue are they? Late payments leave a long-term and significant mark on your credit.
- Amount Owed (30 percent): The amount you owe makes up about a third of your credit score. Paying off credit card bills every month or carrying a low balance is one way to improve scores.
- Length of Credit History (15 percent): The longer you’ve been managing your personal credit history, the better. Credit card companies and banks know that experience counts when it comes to managing money. There is some benefit to developing a credit history early on.
- Types of Credit Used (10 percent): Having a handful of different types of credit (student loans, mortgage, personal loans, credit cards) can benefit your credit score.
- New Credit (10 percent): New credit, like a new credit card or a new loan, affects your overall credit score because it requires a hard inquiry into your credit. Each hard inquiry leaves a small mark on your short-term credit score. The more pulls, the more detrimental it is to your credit.
Know Your Credit Score Before You Apply
Under the Fair Credit Reporting Act, the big three CRAs must supply consumers with one free credit report per year. You can get them from AnnualCreditReport.com. You can also request more than one report for a small charge, usually between $15 to $20.
Checking your own credit, also called a soft pull, won’t count against your score. But when a credit card, bank, or other financial services company checks your credit, known as a hard pull, it typically takes a few points off your credit score.
Knowing your credit score before a hard pull can help reduce unnecessary credit checks. After all, if you know in advance that your credit score isn’t up to snuff, you can take the time to improve it before applying.
The Differences Between the Big Three CRAs
While all three CRAs rely on more or less the same pool of data to create your report, they may each show a slightly different result. There are a few factors that can lead to differences, including account name (ex: do you have an account under Steve, and one under Steven?), how and when their records are updated, and how the bureaus compile and display the information.
Some companies will request a report from all three CRAs. However, most will only request from one because it is more cost-effective.
What CRA Does Your Bank Use?
Although lenders don’t typically publicize which credit reporting agency they use, that doesn’t mean you need to take a shot in the dark. Online forums, like Credit Boards, collect and publish data from people who’ve recently had their credit history pulled for a credit application. Using the search tool, you can find out which CRA your lender is more likely to use.
Here’s a roundup of what borrowers have reported when they applied for credit.
Lenders and Banks That Use Experian
- American Express
Lenders and Banks That Use Equifax
- Discover Card
- A variety of Visa cards
- Wells Fargo
Lenders and Banks That Use TransUnion
- Capital One
- Bank of America
- Best Buy
It’s important to do your own research because a company might draw on credit reports from more than one CRA or switch alliances. Ultimately, checking your credit regularly and taking steps to keep it in good shape can help you be ready for the next time you apply.