Why are there 3 bureaus?

[Anonymous]

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.

[iheartwings]

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@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.

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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

[805orbust]

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.

[Anonymous]

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.

[Anonymous]

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@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.

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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.

[sarge12]

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@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.

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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.

[Anonymous]

Understood, good info above from the last 2 posts.

[Thomas_Thumb]

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@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.

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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.

[sarge12]

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@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.

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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

[gdale6]

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.