topic Re: Why are there 3 bureaus? in General Credit Topics

Why are there 3 bureaus?

Anonymous — Fri, 30 Sep 2016 03:24:55 GMT

Hopefully this isn't a stupid question, but why are there 3 major bureaus? Wouldn't 1 suffice? I just feel like that way there would be 2/3 less scores floating around, everyone would be looking at the same thing and it would just seem more simple. I'm sure the answer comes down to money, just like every other answer related to business. I figured this would make for an interesting discussion topic though.

Re: Why are there 3 bureaus?

iheartwings — Fri, 30 Sep 2016 03:51:08 GMT

@Anonymous wrote:
Hopefully this isn't a stupid question, but why are there 3 major bureaus? Wouldn't 1 suffice? I just feel like that way there would be 2/3 less scores floating around, everyone would be looking at the same thing and it would just seem more simple. I'm sure the answer comes down to money, just like every other answer related to business. I figured this would make for an interesting discussion topic though.

Interesting question. EQ, EX, and TU maintain the largest databases of consumer information, much like the Big 3 auto makers.

But, really, there are many other consumer reporting agencies (think Innovis and ARS, etc.).

Much like auto companies smaller agencies are not as extensive and have niche markets.

I never knew how many companies there were, but the CFPB maintains a list of agencies (and gives you the information on how to get your reports free):

http://files.consumerfinance.gov/f/201604_cfpb_list-of-consumer-reporting-companies.pdf

Re: Why are there 3 bureaus?

805orbust — Fri, 30 Sep 2016 05:52:21 GMT

Wow! That list is sick. I think I've just found my gardening project for the next year or so. I'm going thru EVERY one of those that is relevant... makes me a little angry just thinking about it.

Re: Why are there 3 bureaus?

Anonymous — Fri, 30 Sep 2016 11:48:46 GMT

I don't really see the comparison to the big 3 auto makers. I get what you're saying, but with the 3 major bureaus it's just data collection; They all presumably collect the same exact data and in theory that should translate to the same scores. Basically, the product is the same. With the auto makers there are a ton of different products with different features etc. which translates to more benefits [of maving multiple big auto makers].

I'm not really seeing the benefits of having multiple major bureaus. Maybe I'm not thinking it through, but it just seems things would be simpler if there was just 1. Then everyone would have their score, not scores. All creditors/lenders would see the same score when pulling you, and all of your inquiries would be on 1 bureau which is much more representative what's really going on. There are times where people wil have 10 or 12 inquiries on 1 bureau but only 1 or 2 on another and it's just odd that depending on which of these bureaus the potential creditor pulls from they could view the potential customer completely different ways.

Re: Why are there 3 bureaus?

Anonymous — Fri, 30 Sep 2016 16:19:00 GMT

@Anonymous wrote:

I'm not really seeing the benefits of having multiple major bureaus. Maybe I'm not thinking it through, but it just seems things would be simpler if there was just 1. Then everyone would have their score, not scores. All creditors/lenders would see the same score when pulling you, and all of your inquiries would be on 1 bureau which is much more representative what's really going on. There are times where people wil have 10 or 12 inquiries on 1 bureau but only 1 or 2 on another and it's just odd that depending on which of these bureaus the potential creditor pulls from they could view the potential customer completely different ways.

If there were just 1 credit bureau, that would be a monoply and no doubt they would raise their prices to $100, 200, $400 per report, as high as the market would bear. And to keep it as just one, Congress would have to pass a law preventing other companies from creating their own credit bureaus.

It's just not the American way to create monpolies even if we have had a few like the old telephone company.

Re: Why are there 3 bureaus?

sarge12 — Fri, 30 Sep 2016 17:39:12 GMT

@Anonymous wrote:
Hopefully this isn't a stupid question, but why are there 3 major bureaus? Wouldn't 1 suffice? I just feel like that way there would be 2/3 less scores floating around, everyone would be looking at the same thing and it would just seem more simple. I'm sure the answer comes down to money, just like every other answer related to business. I figured this would make for an interesting discussion topic though.

BBS, Credit reporting agencies are for profit businesses that were created to collect data on consumers and that data can be sold to creditors. There have been many of them and they were and are competitors. At one time, they all used different means of analysing data which caused wildly different results. The big 3 were the most successful at both getting creditors to report to them and selling that data to the creditors. FICO came along and started selling a means of applying the data from the reports to come up with a predictive score which was originally sold to banks and eventually fannie mae, and freddie mac. The big 3 CRA's all saw the value in the scoring system an eventually subscribed. Prior to this all lending decisions required underwriters to review every actual report to make lending decisions, which was inefficient. Of course there were abuses and errors that required laws to protect consumers. The main thing to realise is they were many competitors, and these 3 were the main survivors. Just as the main survivors in the US auto industry were Ford, GM, and Chrysler...noone planned it. They were just the most successful survivors of competition in a free market system.

Re: Why are there 3 bureaus?

Anonymous — Fri, 30 Sep 2016 18:08:03 GMT

Understood, good info above from the last 2 posts.

Re: Why are there 3 bureaus?

Thomas_Thumb — Fri, 30 Sep 2016 18:09:54 GMT

@Anonymous wrote:
Hopefully this isn't a stupid question, but why are there 3 major bureaus? Wouldn't 1 suffice? I just feel like that way there would be 2/3 less scores floating around, everyone would be looking at the same thing and it would just seem more simple. I'm sure the answer comes down to money, just like every other answer related to business. I figured this would make for an interesting discussion topic though.

My thinking is there are only 3 major CRA players (excluding LN for CBIS) because they have successfully managed their oligopoly.

I suspect Fair Isaac wouldn't mind having additional players to sell their product to. The more CRA players, the less leverage they have in squeezing Fair Isaac for lower fees on Fico model scores. Revenue rules.

Re: Why are there 3 bureaus?

sarge12 — Fri, 30 Sep 2016 18:25:18 GMT

@Anonymous wrote:
I don't really see the comparison to the big 3 auto makers. I get what you're saying, but with the 3 major bureaus it's just data collection; They all presumably collect the same exact data and in theory that should translate to the same scores. Basically, the product is the same. With the auto makers there are a ton of different products with different features etc. which translates to more benefits [of maving multiple big auto makers].

I'm not really seeing the benefits of having multiple major bureaus. Maybe I'm not thinking it through, but it just seems things would be simpler if there was just 1. Then everyone would have their score, not scores. All creditors/lenders would see the same score when pulling you, and all of your inquiries would be on 1 bureau which is much more representative what's really going on. There are times where people wil have 10 or 12 inquiries on 1 bureau but only 1 or 2 on another and it's just odd that depending on which of these bureaus the potential creditor pulls from they could view the potential customer completely different ways.

BBS, there are still some lenders that may report to only 1 CRA...usually smaller local Credit Unions and such. No creditor is required to report to all 3, or any of them for that matter, so if a lender reports a loan to TU only, as far as EQ, and EX data is concerned that loan does not even exist.

http://www.bankrate.com/finance/credit/lenders-report-credit-bureaus.aspx

Re: Why are there 3 bureaus?

gdale6 — Sat, 01 Oct 2016 03:30:38 GMT

Once upon a time the 3 CRAs were regional operators. Experian (the former TRW Credit Data) had the West based in CA, Equifax the South and Southeast, based in GA Trans Union the Midwest and North Eastm based in IL. If you moved around the country your credit rating would not follow you and you had to establish a new rating in the changed CRA area. Overtime all this began to change in the mod 70s and all 3 moved to national operations with Experian becoming the largest with lots of investments made by the large corporate entity that was TRW at the time, mostly they were in aerospace which provided the deep pockets for the credit bureau to flourish, the other 2 were not so lucky and are much small operators to this very day.

Re: Why are there 3 bureaus?

Anonymous — Sat, 01 Oct 2016 06:56:52 GMT

Maybe that's why Experian is more detailed and on their game it seems to me.

As others have said it would create a monopoly which would make it more expensive for consumers and so on.

Re: Why are there 3 bureaus?

Anonymous — Sat, 01 Oct 2016 08:43:34 GMT

@sarge12 wrote:
BBS, there are still some lenders that may report to only 1 CRA...usually smaller local Credit Unions and such. No creditor is required to report to all 3, or any of them for that matter, so if a lender reports a loan to TU only, as far as EQ, and EX data is concerned that loan does not even exist.
http://www.bankrate.com/finance/credit/lenders-report-credit-bureaus.aspx

Oh I'm aware of that. My Blispay account for example only reports to EX. I think that is more the exception rather than the rule; 21 out of 22 of my accounts report to all 3 major bureaus or 95% of them. Based on my limited sample size, I'd venture to guess that the majority of those that report end up reporting to all 3 major bureaus.

Re: Why are there 3 bureaus?

Thomas_Thumb — Mon, 03 Oct 2016 13:31:58 GMT

https://www.creditrepair.com/articles/Credit-Improvement/History-of-Credit-Bureaus

History of Credit Bureaus

In the most basic terms, a credit bureau is a clearinghouse of information on consumers. Every time you fill out a credit application, every time you make (or miss) a payment, every time you do just about anything that has to do with your finances, the credit bureaus are there, even if you aren't aware of it. The businesses that extend you credit, including credit card companies, lenders, mortgage brokers and others look to the information provided by the credit bureaus to help them make the decisions about who to give credit to, and who to avoid. In short, the information provided by the credit bureaus helps them make good business decisions and protect their assets. But how did this whole thing get started, and why is it important to know?

How the Credit Industry Began

Each of the three major credit bureaus, Equifax, Experian and TransUnion, manage approximately 190 million credit files.

The basic concept of credit bureaus can be traced back as early as the 1860's, and functioned primarily to provide local merchants with a way to keep tabs on the people who traded and did business in their immediate area. The 'Credit Bureau' essentially consisted of a list of individuals who were poor credit risks. Prior to the use of a list, merchants extended only a very small amount of credit, and that was based only on the merchant's personal knowledge. After World War I, however, the industry really began to take shape. The population became more mobile, and several advances in technology and electronic data helped the progress. With a mobile population came a broader base of merchants, and the credit industry stepped in to provide information on consumers that could be used to determine whether or not to grant credit. Information provided by the early industry included employment records, information from landlords, data in public records, and sometime direct investigations of individuals.

Consumer Credit Bureaus Today

In 1906, several of these bureaus formed the Associated Credit Bureaus, Inc. This organization provides services like fraud prevention, risk management, check verification and collections to the credit bureaus. The Associated Credit Bureaus, Inc. represents the credit bureaus before the Federal Trade Commission and state and federal legislators, protecting their interests. Although it may seem a bit Orwellian, the bureaus are actually pretty important. Recent estimates indicate that there are somewhere around one billion credit cards in use in the U.S., and an average of two billion pieces of data entered monthly, in order for any lender, merchant or business to make a reasonable decision about your credit-worthiness, someone has to manage that data. In fact, each of the three major credit bureaus, Equifax, Experian and TransUnion, manage approximately 190 million credit files. It's a pretty big job, and they're pretty serious about it. However, as with any job of that scope, mistakes are bound to happen.

The Three Major Credit Bureaus

Although there are many smaller credit bureaus, the vast majority of lenders today use one or more of the "Big Three" credit bureaus.

Equifax

The oldest of the three major credit bureaus was founded in 1899 as Retail Credit Company. The company grew very quickly, by the 1920's they had offices throughout the US and Canada and by the early 1960's they held information on millions of Americans. Retail Credit Company's willingness to distribute their extensive information to just about anyone, as well as their move to computerize their records led directly to the Federal Fair Credit Reporting Act of 1970. In 1975 they changed their name to Equifax, allegedly to improve their image.

TransUnion

Created in 1968 by Union Tank Car as their holding company, in 1969 TransUnion moved into the credit industry and began acquiring smaller regional and major city credit bureaus, which typically had existing contracts with local retailers. The only way to get a contract with these local retailers was to buy the credit company that owned the contract. TransUnion now has over 250 offices in the U.S. and 24 other countries around the world.

Experian

Founded in 1980 in Nottingham, England as CCN Systems, Experian moved into the U.S. credit business in 1996 with it's acquisition of TRW Information Systems. Experian has continued to grow, and now has operations in 36 countries worldwide.

Re: Why are there 3 bureaus?

Anonymous — Tue, 04 Oct 2016 16:29:07 GMT

As always, insightful information T. Thumb.

Re: Why are there 3 bureaus?

sarge12 — Thu, 06 Oct 2016 00:04:37 GMT

@T_Thumb....Is there anything about credit you don't know?

Re: Why are there 3 bureaus?

Anonymous — Thu, 06 Oct 2016 04:37:36 GMT

I am guessing that TT went to this web site called "Google" and typed in History of Credit Bureaus. That's how he found out what the history of the credit bureaus was.

I bet you'd find that he can produce a history of indonesian wines as well as a working overview of eskimo sports and games too.

:-)

Re: Why are there 3 bureaus?

sarge12 — Thu, 06 Oct 2016 05:11:06 GMT

@Anonymous wrote:
I am guessing that TT went to this web site called "Google" and typed in History of Credit Bureaus. That's how he found out what the history of the credit bureaus was.

I bet you'd find that he can produce a history of indonesian wines as well as a working overview of eskimo sports and games too.

:-)

What you want to go crush my hero worship for?

Re: Why are there 3 bureaus?

Anonymous — Thu, 06 Oct 2016 05:24:48 GMT

@Anonymous wrote:
I am guessing that TT went to this web site called "Google" and typed in History of Credit Bureaus. That's how he found out what the history of the credit bureaus was.

I bet you'd find that he can produce a history of indonesian wines as well as a working overview of eskimo sports and games too.

:-)

Apologies for the minor threadjack, but the snark in me couldn't resist - here you go

History of Indonesian Wines

Eskimo Sports and Games

Enjoy!

Re: Why are there 3 bureaus?

Thomas_Thumb — Thu, 06 Oct 2016 14:51:00 GMT

@Anonymous wrote:
I am guessing that TT went to this web site called "Google" and typed in History of Credit Bureaus. That's how he found out what the history of the credit bureaus was.

I bet you'd find that he can produce a history of indonesian wines as well as a working overview of eskimo sports and games too.

:-)

Actually I refuse to use Google search or Google Chrome due to their information gathering.

For cellphone searches I use an app called Browsie Browser. I have BlackBerry 10 as a Useragent with DuckDuckGo as a search engine along with suggestions by Yahoo. The browser allows me to disable cookies and Java script, block ads, search in private browsing mode and set browsing sessions/history to "not saved"