In the United States, there are three major consumer credit reporting agencies, also known as credit bureaus. Two of the largest are Experian and Equifax. The third nationwide credit bureau is TransUnion.
Information that the credit bureaus maintain about you can affect your ability to qualify for financing like a mortgage, auto loan, credit cards and more. And if you’re eligible for a loan or credit card, these details could cause lenders to charge you higher or lower interest rates. Some of the data that Experian and Equifax collects might even be viewed by potential employers.
It’s critical to understand the meaningful roles that Experian and Equifax play in the financial system, and how they can impact your life. Here’s what you need to know about these important players in the credit industry.
Experian vs Equifax: Key points
Both Experian and Equifax collect data about you and other consumers from lenders, banks, credit card companies and other creditors. Each major credit bureau maintains a database with information on around 220 million U.S. consumers.
Lenders rely on credit reports from Experian and Equifax (and TransUnion as well) to provide insight into how applicants have managed past credit obligations. These credit reports may feature details such as:
- Accounts: Types of accounts, payment history, account numbers, current balance, credit limit, payment status, date account opened etc.
- Public records: Bankruptcy filings, unpaid child support etc.
- Credit inquiries: Companies that accessed your credit during the previous two years.
- Personal information: Name, address, date of birth, Social Security Number and employer.
Credit scoring models, like FICO and VantageScore, can also evaluate credit data to make predictions about how likely you are to pay bills late in the future.
About Experian
Experian is a data analytics company that traces its roots back to 1803 in London, England where a group of tailors shared information about customers who didn’t pay their debts. In the United States, Experian’s beginnings started in the early 1950s with scientists Simon Ramo and Dean Wooldridge. The pair eventually struck a business deal to form TRW Credit Data and become one of the top five credit agencies in the nation. Fast forward to 1996 and private equity firms Bain Capital and Thomas H. Lee purchased TRW changing the credit bureau’s name to Experian.
Today, Experian has grown to nearly 22,000 employees throughout 30 different countries. Yet it’s important to remember that consumers are not Experian’s primary customers. Although the credit bureau sells some products directly to consumers (like credit monitoring services), the main way Experian earns a profit is by selling data to lenders, credit card companies, creditors, insurance providers and other businesses.
How your credit is scored
Experian collects a wide variety of information about the consumers in its database on an ongoing basis. It compiles this information into individual credit files which lenders and others can purchase (as credit reports) to evaluate the credit risk of a potential borrower.
Although credit scoring models like FICO and VantageScore can evaluate your Experian credit report, it’s important to understand that your credit score is a separate, add-on product. Your credit score is not part of your Experian credit report.
You can also access free copies of your personal Experian credit report. The Fair Credit Reporting Act (FCRA) gives you the right to a free credit report from each credit bureau once every 12 months via Annualcreditreport.com. Yet your credit score isn’t part of that free report. Experian, however, does offer consumers free access to their FICO® Score each month through its website. And you can access a free copy of your Experian credit report once a month as well.
About Equifax
Equifax is the oldest of the three major credit reporting agencies in the United States. The credit bureau traces its beginnings back to 1899 in Atlanta, Georgia, where the company is still headquartered today. The credit bureau, originally known as Atlanta’s Retail Credit Company (RCC), collected data about millions of Americans and computerized the information when technology advanced in the 1970s.
In 1975, RCC changed its name to Equifax. The 1970s also marked many other changes for the credit bureau thanks to the passage of the Fair Credit Reporting Act (FCRA). Equifax was required to open its files to the public and purge much of the information it had previously collected about consumers such as race, sexuality, disabilities and other details (All credit bureaus had to follow these rules).
How your credit is scored
Credit scoring at Equifax works in largely the same way as the process works at Experian (and TransUnion). A credit scoring model like FICO or VantageScore evaluates your Equifax credit report and assesses your risk level based on those details.
Equifax also offers consumers free access to a credit score (VantageScore 3.0) through the credit bureau’s website once a month. Consumers can sign up for a free monthly Equifax credit report as well.
If your Equifax report contains a history of on-time payments, low credit utilization, limited credit inquiries and other positive credit management habits, you’re likely to earn a good credit score based on your Equifax credit information. On the other hand, you could earn a bad credit score if your Equifax credit report is full of derogatory information like late payments, collection accounts and excessive hard credit inquiries.
Is one credit bureau better than the other?
Experian and Equifax are competing data analytics companies. Yet both credit bureaus sell similar products to lenders and consumers and neither is necessarily “better” than the other. It’s similar to asking if co*ke is better than Pepsi; each are types of colas but formulated in slightly different ways.
It is worth noting that you can have different information on your Experian and Equifax credit reports. As a result, your credit scores based on these two reports could differ as well (and the same goes for your TransUnion credit report and score for that matter).
Because the credit bureaus are competitors, they don’t share account information about consumers. Therefore, if you happen to have negative credit items on an Equifax report, like a collection account or late payments, that don’t show up on your Experian credit file (or vice versa), it would be possible to see a lower credit score from one credit bureau than the other.
Frequently asked questions (FAQs)
Credit bureaus are data collectors. They gather and store information about the financial habits of consumers. Lenders, banks, credit card companies and others can purchase this data (in the form of credit reports) to evaluate risk and help make more informed lending decisions about credit applicants and current customers.
Lenders may purchase credit reports from any of the three major credit reporting agencies to use in lending decisions — Experian, Equifax or TransUnion. And the credit reports that lenders purchase could change over time. Factors such as where you live and a company’s current agreement with the credit bureaus may influence which credit bureau a lender uses to purchase credit reports.
Lenders use many different types of credit scores to predict risk. However, all credit scoring systems must meet certain criteria before lenders can use them. According to the Equal Credit Opportunity Act (ECOA), all credit scores that lenders use must be “demonstrably and statistically sound”. This means that all credit scores in the U.S. lending market are accurate, though some might be better at predicting risk than others.
Mortgage lenders will review your FICO Scores from all three major credit bureaus when you apply for a home loan. Yet the Federal Housing Finance Agency (FHFA) announced in late 2022 that it will require mortgage lenders to incorporate VantageScore credit scores into the mortgage evaluation process beginning in 2024. Regardless of which bureau a mortgage lender is using, ideally a good credit score will get you the best rates when buying a home.
