The credit reporting industry is a network of made up of creditors, merchants, and other information sources, all supplying credit information on customers who apply for and use credit. This information works its way up the pyramid, reaching its most condensed and accurate format when it gets to the top.
Credit Rating Providers
The Big Three - At the top of the pyramid:
Experian (formerly TRW)
Equifax (also known as CBI)
These Big Three are major independent, but interdependent corporations, who act as national clearinghouses for the credit reporting industry. They are independent of each other in terms of the internal operations of their own respective companies; they are interdependent on each other in terms of trying to maintain the most accurate credit history information on file for their subscribers.
Each of the Big Three endeavors to have a national presence, but ultimately, each seems to have particular strength within certain geographic territories. In the southeastern states for example, Equifax has a marked edge over Experian and Transunion in the accuracy of their credit reports on individuals living in that part of the country. In the northeastern and northern midwestern states, Transunion is generally considered the primary repository. In the Midwestern and western states, it is Experian who is the dominant primary repository.
As with every rule, there are exceptions. Many lenders have zip code matrixes, indicating which of the Big Three is the primary repository in which particular zip codes A lot of these lenders, when ordering only one credit report on a loan applicant, will specify that the report be drawn from the Big Three repository listed as the primary repository for the zip code in which the borrower lives.
If the lender doesn't specify which repository he wants, the agency supplying the credit report will usually draw on the primary repository for the zip code from which the lenders offices are located in.
Usually, what the lender is looking for at the outset is whether or not there is credit information that will automatically kill the loan, so they don't waste a lot of time working on a loan application that never had a chance to begin with. If the single repository credit report looks doable, later on in the loan process the lender will order up either a standard factual credit report, or a triple report. We'll discuss this further below (see Types of Credit Reports).
Regional Credit Service Providers - at the next level, are the major credit information houses that provide credit information to most lenders. These companies are usually contracted with all of The Big Three Repositories, in order to have access to all three repositories credit information on borrowers. There are about 50 or so of these companies operating throughout the country.
These companies also contribute credit history information to The Big Three repositories. For example, let's say I am a loan officer, and the company I work for has a contract with Chase Information Services, or Standfacts, or DMS, or Credit Data Southwest, or one of the other major credit service providers. I order a credit report from my provider, and it doesn't show a mortgage account that my client says he has.
I contact the provider, who in turn will check all three repositories to see if the mortgage is being reported to any one of them. If it still isn't showing up, my company's contract credit provider has one of their employees contact that particular mortgage lender - to verify both the existence of the loan, and it's mortgage rating (generally the payment history for the past 12 to 36 months, depending on my company's underwriting requirements).
My credit service provider then issues a new credit report to me, now listing the mortgage in question and the months rated. At the same time, they pass the information upstream to the repository they pulled the initial report from, or in many cases, to all Big Three repositories. Shortly thereafter (about 14 days), one, or all of The Big Three will show that account on their data files, and they will have factored it into to the credit rating for future credit reports.
The Local Bureaus - at the ground floor, sit the local credit bureaus. These are the credit reporting agencies that most of us are familiar with to some degree. There is usually at least one bureau in all but the most sparsely populated counties in the U.S. Many of these bureaus are the credit service providers for local merchants, landlords, and businessmen. Many of them are also local collection agencies as well. Part of the reason they provide this service is to get more cooperation out of local merchants toward providing credit account information on their respective customers.
These local bureaus are the guts of the credit reporting industry. It is through them, that credit information is collected from outposts all over the country, and is sent upstream to the Big Three. In many areas, these local bureaus are only working with one repository, hence, as we mentioned earlier, the repository who has the most local bureau accounts within a given area usually becomes the primary repository for that region.
We hope you found this information helpful.