Guidelines for Choosing Among the Three Major Credit Reporting Agencies
May 17, 2016
Individuals or businesses not listed with one of the major credit reporting agencies may risk being denied funds or will be required to furnish a personal history check and personal guarantee. That’s why choosing to register with one of the major credit reporting agencies is an important step for any business looking to assess risk, obtain funds, and ensure smooth financial transactions in their financial investments. Over thirty agencies exist in the United States, but only three are major establishments.
Each collect the same basic information, including name, social security number, date of birth, employer, current debts, how many times a profile has been accessed, and payment history. All three work with the Fair Isaac Corporation to calculate FICO scores. However, these scores will vary because all three collect information differently and each use their own methods to assess that information.
Because these methods vary, FICO scores can differ between them by as much as 100 points—an enormous difference for an individual or business looking to obtain funds or have a financial transaction approved. That’s why it’s important to have guidelines for choosing one.
While banks use the bureaus to determine creditworthiness, many businesses have even larger investments at stake, especially when bonds are issued to investors and business ratings help safeguard those investments. The first step in choosing between the major credit reporting agencies is to determine which bureau the majority of suppliers, creditors, and lenders pull their reports from. For businesses, this can be done by contacting its existing business partners and asking for the information.
These establishments should then be asked to provide their evaluation of the following criteria:
Criteria 1: How accurate is the data being collected? Call each agency directly and ask what methods they use to ensure that the information that other companies send them is accurate. Next, contact lenders, data furnishers, and so forth, as well as existing business partners and ask what their experience with the bureau has been like. If those registered with a specific bureau have a long enough history with the bureau, they will have some idea as to how often they have dealt with disputes that proved to be reporting mistakes.
Criteria 2: How accessible is the database? A good way for businesses to determine this is to contact its existing business partners and ask for their personal evaluation. Were they easily able to get a representative on the phone? Does the bureau require a member to buy its products in order to qualify for personal assistance?
Criteria 3: What are their marketing practices? Do they offer free services or is there a grace period where you eventually have to pay for those services?
Criteria 4: How are they perceived by other institutions? If the bureau has a good reputation with the establishments who use them, they should score high in their accuracy of data, method of scoring, and general accessibility.