How these two major credit bureaus work

Experian and Equifax are the two largest credit bureaus in the United States. Both companies collect credit information on individual consumers, which they sell to lenders and others. Lenders, in turn, use the information in the reports to assess a prospective borrower's creditworthiness. While the two bureaus do similar work, they also differ in certain ways.

Key Takeaways

As major credit bureaus, Experian and Equifax work in similar ways.
However, the information they collect and how they report it can differ.
For example, some creditors may supply information to one bureau but not the other.
As a result, your Experian and Equifax credit reports may be different and the credit scores that are derived from them may differ, as well.

How Both Credit Bureaus Work

Credit bureaus collect data on individual consumers that is supplied to them by creditors, such as banks, mortgage lenders, and credit card companies. They assemble that data into credit reports, which list credit accounts the individual has opened or closed, as well as their month-by-month payment history within the last seven years.

Based on that credit history, credit scoring companies can create a numerical measurement of a person's creditworthiness. Credit scores scores typically range from 300 to 850, depending on the model used to create them. The oldest and most widely used scoring system is the FICO score from the Fair Isaac Corporation. A newer competitor is the VantageScore, jointly developed by Equifax, Experian, and TransUnion, the smallest of the big three credit bureaus.

A credit score can affect whether someone will get approved for a credit product, such as a loan or credit card. Credit scores are also used by lenders to determine the size of a loan they're willing to make as well as the interest rate to charge the borrower.1 Credit scores can even come into play when someone applies for a job, an apartment, or an insurance policy.

Experian and Equifax collect some of the same basic information, including:

Personal data, such as name, birth date, address, and employer.
Account summaries of loans as reported by creditors.
Public records, which list any judgments against the person, as well as bankruptcies and IVAs (individual voluntary arrangements).
Previous credit checks and inquiries from creditors, including a list of all of the credit applications that have been made by the borrower.

It's important to note that not all lenders supply information to both of these credit bureaus. A particular account may appear on one bureau's report but not on the other's. So their reports may differ, as can the credit scores that are derived from them.

In addition, lenders often use their own credit scoring models and may arrive at different scores based on the same information.

How Experian Works

Experian breaks its credit reports into sections, which include the following:

Personal information, including past addresses.
Employment.
Accounts, which include credit cards, loans, mortgages.
Inquiries, which include any creditors checking a report due to a recent application.2

Experian provides monthly data for each account, including the minimum payment due, payment amounts, and balances. Its reports indicate how much longer any given account will remain on the credit history and also list the monthly balance history for each account.3

More companies use Experian for credit reporting than use Equifax. This alone does not make Experian better, but it does indicate that any particular debt is more likely to appear on an Experian reports.

How Equifax Works

Equifax lists accounts in groupings of "open" or "closed," which makes it easy to view current versus old credit data. Also, Equifax provides an 81-month credit history, or approximately seven years' worth of transactions.4

Equifax breaks its credit reports into sections, including:

Revolving accounts, including credit cards and charge cards from department stores.
Mortgages.
Other accounts, which might include debt collection companies.
Consumer statements, which an individual can add to their report if they wish to explain something, such as a potentially damaging entry. Experian also allows such notes to be added.
Additional personal information, such as a list of the person's previous addresses.
Inquiries from potential creditors.
Public records, including any bankruptcies.
Collections (accounts that have been charged off by the creditor and sent to collection agencies due to lack of payment).

Note

Because credit reports can differ from one bureau to another, some lenders will consult more than one to try to get a fuller picture of a potential borrower. Mortgage lenders, in particular, may request reports from all three credit bureaus due to the amount of money involved.

Is Your Personal Data Safe?

Data breaches have the potential to occur at both credit agencies. In 2017, a data breach at Equifax resulted from a cyber attack, which may have put financial data on 147 million Americans at risk. The breach is reported to have happened between May and July of 2017 but wasn't announced to the public until September that year.5

As a result, Equifax experienced an enormous amount of negative press that ultimately led to the CEO of the company retiring. In 2015, Experian had its own data breach in which 15 million of its customers' Social Security numbers were put at risk.6

You can obtain your credit reports from Equifax, Experian, and TransUnion free of charge at least once a year from the official website for that purpose, AnnualCreditReport.com.

Equifax and Experian, as well as TransUnion, explain the process for disputing information you believe to be inaccurate on their websites. Unless your challenge is judged to be frivolous, they are required by law to investigate the matter and report back to you.7

How Can You Obtain Your Credit Scores?

You can buy your credit scores from the credit bureaus or credit scoring companies or, in some cases, obtain them for free. For example, your bank or credit card issuers may provide them free of charge. There are also websites where you can get free credit scores, some reputable and some otherwise. Investopedia publishes a periodically updated list of top sources for free credit scores.

Can You Opt Out of Credit Reporting?

Unfortunately not, according to the Consumer Financial Protection Bureau. "You have no right to opt out of having creditors report your accounts to the credit reporting companies," the CFPB says.8

The Bottom Line

Experian and Equifax perform a similar function in collecting financial information on individual consumers and then selling it to prospective lenders and other interested parties. However, their information can differ in some respects, as can the credit scores that are derived from it. For that reason, consumers are well advised to request their credit reports from both Experian and Equifax (as well as the third major bureau, TransUnion) periodically to check for any errors and not to assume that if they've seen one report they've seen them all.

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Experian vs. Equifax: What's the Difference?