Dear TZ - What are credit bureaus, credit reports, and credit scores?

 Dear TZ -

This credit stuff is confusing - there are credit bureaus, credit reports, and credit scores, and I can't tell the difference. Can you simplify it?

Bob the Borrower

Dear Bob,

Credit bureaus collect and organize credit data - any time you use a credit card or pay an auto loan or a mortgage, they compile the information on your payment history. Then, they sell this information to other credit grantors from whom you seek to borrow money.

There are three major consumer credit bureaus - Equifax, Experian, and TransUnion. Most creditors report to all three bureaus and most mortgage applications require that all three bureaus be reviewed before approval.

A credit report is a summary of your credit and payment history. Thanks to digital processing, it only takes  a few minutes from the time a credit grantor requests your report to the time when they can see it.

There are three types of credit reports:

1. Single bureau report - provides information from only one of the three credit bureaus.
2. Tri-merge report - combines information from all three credit bureaus. This is the most common in mortgage applications.
3. Residential Mortgage Credit Report (RMCR) - A more complex report that is used when a borrower's credit report has inaccuracies or inconsistencies and clarification is needed. This report may include employment and rental history as well as credit and payment history.

A credit score is a numeric value that incorporates all of your credit and payment history into a mathematical equation and calculates the probability of repayment of any future loans.  The 7 factors that affect your score are loan repayment behavior, credit score inquiries, delinquency of loans, length of established credit, composition of credit, quantity of credit already available, and the amount of outstanding loans. For more information on how your credit score is calculated, see  What factors affect my credit score?.

Good luck!

Team Zuhl