Understanding the Credit Bureau reporting process

Who are the major Credit Bureau agencies?

There are three major credit reporting bureaus: TransUnion, Experian, and Equifax – that compile consumer information into a credit file disclosure report, or a credit report. Equifax is the oldest Credit bureau; and it was founded in 1899 as the Retail Credit Company.  TransUnion was created in 1968 by Union Tank Car Company. Today, TransUnion has more than 250 offices in the U.S. and 24 other countries around the world. Experian, founded in 1980 in Nottingham, England by CCN Systems, is the youngest of the three Credit Bureau companies.  Experian expanded its operations into the U.S in 1996 when it acquired TRW Information Systems.   

How does a Credit Bureau  report on consumers?

Generally, anytime a consumer fills out a loan application, the consumer is giving the lender permission to obtain a report of their credit history. Lenders will often use request credit reports from one of the three major credit bureaus. The Credit Bureau report shows outstanding loans a consumer is paying and delinquent payments. If a consumer has filed for bankruptcy in the last seven years, that bankruptcy also will appear on the consumer's credit report. When a lender requests a consumer's credit report, the Credit Bureau records the request as an inquiry on the consumer's credit report. There are two types of inquiries – a hard hit and a soft hit.

What is a hard hit?

Every time a lender inquires into a consumer's credit bureau report regarding an application for a loan, the credit bureaus register the inquiries as hard hits. If a consumer has too many hard hits on their credit report, their credit score could fall. A high credit score indicates the consumer has the ability to pay back the loan, while a low credit score indicates the consumer may not be able to repay the loan. Some times a consumer may have multiple inquiries in one day, such as a vehicle purchase. When a consumer shops around for a car, each dealership may pull a credit report. The credit bureaus may register these multiple inquiries as hard hits. However, if you apply for more than one credit card, each application may count as a hard hit.

What is a soft hit?

Generally, when a credit card company, collection agency, or another third party, requests a consumer's credit report from one of the three Credit Bureau company's in an effort to acquire information on, the credit bureaus record the inquiry as a soft hit. A soft hit is not visible to third parties that request a consumer's Credit Bureau report to review for credit worthiness. Therefore, a soft hit does not affect the consumer's credit score.

For more information, visit the NCO Financial Systems, Inc.,(“NCO”) consumer website at www.consumerhelpunit.org.

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