Q&A Video: How Do Credit Reporting Agencies Get And Keep My Information?

John Ulzheimer

John Ulzheimer | Q&A Videos

Sep 07, 2015 | Updated Sep 09, 2015

The 3 credit reporting agencies – Experian, Equifax, and TransUnion – collect information about your loans, credit cards, and other financial activity. This information is voluntarily offered by the lenders, who benefit by being able to get a good idea of someone’s credit risk by looking at their credit report.

Credit scores are created based on the information in these reports.

If you think that some information is incorrect or missing from your credit reports, like a tax lien or collection account, you can file a dispute with the relevant agencies.

Learn more about how credit information is collected and reported in our Q&A video with credit expert John Ulzheimer.


Hi, my name is John Ulzheimer and I am a credit expert who contributes to CreditCardInsider.com and today’s question is this: How do the credit reporting agencies get and keep your information?

That’s an excellent question that’s something that not a lot of consumers are privy and understand how this information actually makes it from your bank all the way to the credit reporting agencies.

Believe it or not, it is an entirely voluntary system. There is no requirement for any bank, credit card issuer, mortgage lender, student loan lender, to send any of your information to any credit reporting agency at any time. They choose to do so, and the reason they choose to do so is because the carrot and the stick, right? I mean if your information is going to be reported to a credit reporting agency for all to see then the hypothesis is that you’re more likely to manage the account properly and pay your bills on time.

The credit reporting agencies essentially act as massive data warehouses and they will gladly accept information from what’s referred to as a “data furnisher,” and a data furnisher in almost every single scenario is going to either be a collection agency or some sort of a financial institution like an auto lender, or a credit card issuer.

The credit reporting agencies do not pay any bank to report information to them, however they make money because they’re taking this information and homogenizing it and combining with the information sent to them by other banks to create this credit report about you and then they take that information and they sell it to other lenders, to insurance companies, to utility companies, to employers, to you in some cases if you want to get a copy of your own report and you end up buying it.

So it’s a very interesting business model. They have very low cost of goods and they take this information and then turn right around and sell it back to people who gave them the information at no cost in the beginning.

The minute something is reported to the credit reporting agencies you have a considerable amount of rights under the Fair Credit Reporting Act. The information has to be accurate and if you do not believe that it is accurate you have the right to challenge the information with the reporting agency and their obligation, because they are keeping your information, is to perform a reasonable investigation if you challenge some aspect of the account that they’re maintaining.

So you may challenge whether or not it’s yours, you can challenge the balance. If it has some sort of derogatory account history associated with it you can certainly challenge that information, and when you do challenge this information, the credit reporting agencies will then contact the furnishing party, again either a bank or a collection agency, and they’ll basically ask them “Hey look we got a dispute from John, he’s saying the balance is incorrect, can you please verify the current balance?” and then the bank also has an obligation to perform a reasonable investigation and then send back a correction if one is warranted.

And then the credit bureaus, as the stewards of the information, have to update the file and then send you a copy of the report. And all of these things that I just went through are free. There’s no cost involved with doing any of this. You can do it on your own at no cost at all.

Most companies do choose to report your information to the reporting agencies, but because it is a voluntary system there’s no guarantee that they’re going to do so, and if they do, there’s no guarantee that they’re going to report to all three of the reporting agencies: TransUnion, Experian, and Equifax. There are many scenarios where a financial institution may just choose to report to one of them, or may choose just report to two of them, but not choose to report to all three of them.

If you’re going to report something to a credit bureau you have to have an account with them. It’s not just the wild wild west where people are sending information into the bureaus and the bureaus are posting it on your report. You actually have to have a contract and an active account and essentially certify that you’re a valid service provider, that you have permission under the Fair Credit Reporting Act to pull credit reports and you’re going to comply with the obligations of the Act if you do choose to send information to the bureaus.

So it’s not a simple as just anybody can report information like, for example, you’re living in someone’s house and they’re renting a room to you, and you miss your rent for one month, they just can’t pick up a phone and call a credit bureau and stick that on your credit report, it’s considerably more complicated than that.

And, of course, you as the consumer, have the right to see what’s on that report whenever you want to see it. You can go to annualcreditreport.com and pull a copy of it. You can pull it from all three reporting agencies once every 12 months at no cost.

There are also a variety of other websites that will gladly give you a credit report at no cost, as well. Depending on what state you live in there may actually be some state rights that you’ve got that will give you additional free copies of your credit reports annually rather than just the one copy you get pursuant to federal law at annualcreditreport.com.

Point being is that you should be engaged with the information on your report because it is a voluntary system. You never really know what’s going to be on it until you actually pull it and see it, and really the only way for the reporting agencies to know that something is wrong is for you to tell them “Hey look, something on my report is wrong, please go ahead and correct it.”

So if you have any other questions pertaining to credit or financial topics, then please submit them to Credit Card Insider or in the comments section below. Thanks for watching, and have a nice day.

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