While there are several credit reference agencies (CRA’s), there are three major players that are mainly used for credit card applications. They are Equifax, Experian, and TransUnion. While not every bank will use every agency, they will oftentimes use at least one of these three. If you are not approved for an application you will be advised which agency was used and you will then be entitled to a free credit report per the Fair Credit Reporting Act (FCRA). For a free credit report with a paid subscription to a credit monitoring service then please visit our free credit report page.
How the Major CRA’s Determine your Credit Score
While the three major credit reference agencies, Equifax, Experian, and TransUnion are all independent from each other, they all use a similar method for determining your credit score. Typically, your credit score is based on a formula from FICO (Fair Isaac Corporation) and varies between 300 (horrible) to 850 (superb).
In 2006, these three credit reference agencies jointly agreed to use an additional credit scoring system called VantageScore Solutions as a competitor to FICO. These scores range from 501 to 990, which can cause confusion to the consumer who is not aware there are two scoring systems.
To throw a little more complication into the mix, FICO’08 has recently been released, which changes the scoring tiers by approximately 20 to 30 points. According to FICO, they have changed their formula (for the first time since it was created twenty years ago) to differentiate between people with good credit history suffering some struggles and the deadbeat credit risk. Previously, a person with repeat late payments was placed in the same category as the occasional missed payment person. With the new system, previous history will be calculated differently to supposedly distribute a fairer score.
FICO’08 is also supposed to reduce credit fraud called piggybacking. Previously people could pay to have their credit repaired by scamming the system and tagging onto a person with good credit history. Now only authorized users can get points by sharing a credit history (like Mom and Dad helping out Junior in college).
Determining Who Pulls Which CRA Report
Although most people aren’t interested in which lender pulls which credit reference agency report, it can make a difference it you are denied a request for credit. Since credit inquiries can ding your credit score, you do not want to request application upon application and receive denial after denial. Therefore, if you know which lender uses which agency, you can try to choose which lender to apply with next.
For example, American Express and Citibank both use Experian, so if American Express denies your application based on a credit report from Experian, you probably shouldn’t bother applying for a credit card with Citibank. Instead, you may want to try MBNA who uses both Experian and Equifax, so you have a slightly higher chance of getting a different credit report. Once you have been denied credit, you will be informed of which credit reference agency was used. At any time you can actually just call and ask a lender which agency they use. Sometimes the information can also be found in the small print of the application.
Unfortunately, if they use more than one agency, there is no way of determining which agency they will use for your report and you certainly do not have an option of making a request. Other than trying to find lenders who use one agency over the other, the best thing you can do is request your own copy of your credit report from each agency (which you are entitled to receive free once per year) and compare the reports.
Verify all of the information on your credit report and immediately notify the agency of any errors. Since not all lenders report your information to all three agencies, your reports and credit scores could vary quite a bit, so knowing your own credit information can be quite helpful. If you always pay your bills on time and in general have a low balance and high credit limit, then you stand a good chance of having similar reports from all of the agencies and no need to worry. Of course, many people have errors on their credit report that need to be cleared up so it is always a good idea to get a free credit report.
Your Rights under the Fair Credit Reporting Act (FCRA)
As stated above, you have the right to one free credit report per agency per year. You also have the right to a free credit report if you are denied credit, employment, or insurance because of your credit history. Whenever you receive an adverse decision you should be informed of the decision in writing and be advised of the credit reference agency that supplied the report. Additionally you should receive the information for how to go about requesting your free credit report and you have 60 days to do so.
The other times you are entitled to free reports are if you are unemployed and seeking employment, if you are on public welfare, or if you believe your credit history is erroneous due to fraud. You can also buy a copy of your credit report whenever you want. Fees vary by state but typically range from $5 to $11.
Since most lenders use multiple credit reference agencies, it is really hard to determine who is going to furnish your report to whom. To be safe, before requesting any large loans or credit lines, you should request your own credit reports in advance and review them yourself. This gives you the chance to know where you stand and will help minimize any surprises or disappointments.
Most credit card companies use at least two of the three main agencies, so, if you want to apply for a credit card, unless you have a known reason to worry about your credit report, you may want to instead focus on finding the card with the lowest rates or the best benefits. To start finding credit cards now, use our free credit card chaser tool on our home page now!