Credit reporting agencies, sometimes known as credit bureaus, collect data from multiple sources to assess your creditworthiness – basically, whether you tend to pay what you owe. They combine that data into credit reports they sell to companies you want to do business with.
The types of information collected by credit reporting agencies include:
- Personal identity: name, address, Social Security number, and date of birth.
- Credit accounts: types of credit, the amount of credit extended to you, how much of it you’re using, your repayment record, applications for new credit accounts, length of credit history.
- Public records and collections: any tax evasion, bankruptcy, foreclosures, repossessions, and debt collections.
- Alternative data: mobile phone bills, rent payments, utilities.
- Non-credit information: current and previous employers, salaries.
In a sense, your information goes full circle. Banks and other companies provide your credit and other personal information to credit reporting agencies for free. The agencies combine the information with data from other sources, such as credit card companies, debt collectors, and public records. And then many of the same companies – the so-called “data furnishers” – turn around and buy back the agencies’ more comprehensive credit reports.
Like everything human, of course, this process isn’t perfect …
Given the possibility for mistakes, identity theft, and other issues at each step in the process, both the agencies and the companies that furnish information are subject to standards and regulatory oversight at the state and national levels.
Still, credit reporting generated the most complaints to the CFPB in 2020, followed by debt collection and mortgage issues.4 The Federal Deposit Insurance Corporation has cited errors such as outdated information, missing loan payments, incorrect Social Security numbers, and reporting on individuals with similar names and addresses.5 One of the Big Three suffered a major data breach affecting millions in 2017.
To combat these and other problems, lawmakers and regulators have continued to update and enforce standards in recent years. Meanwhile, legislation has been introduced in Congress to further improve the transparency, accuracy, and security of credit reporting agencies.