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- Credit Report Companies – Debunking 5 Myths
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## Credit Report Companies – Debunking 5 Myths

Credit reporting companies, sometimes referred to as the “Big Three” credit bureaus, play a powerful role in the world of consumer finance. These reports are used by thousands of lenders nationwide to decide who qualifies for a loan and how much interest consumers should pay on their debts.

Here I debunk 5 myths about credit reporting companies:

**Myth #1: The three bureaus use different formulas to calculate your credit score**

**The truth: **All three bureaus use the same formula to calculate your credit, or FICO, score. The formula was created and is managed by Fair Isaac Corporation. You’ve probably noticed that your credit score varies slightly from bureau to bureau for each of the three bureaus. The reason for this discrepancy is that each bureau has access to slightly different sources of information (such as banks, credit card companies, mortgage lenders, etc.) related to your credit history.

**Myth #2: Fixing an error in a file in one office will fix it in all three**

**The truth: **If you find errors or need to make corrections to your credit reports, it’s important to contact each bureau individually. The best guide is to analyze the reports from each of the three bureaus separately and then contact each one only about the errors found in their specific reports.

**Myth #3: Bureaus can always charge you for your credit report**

**The truth: **Credit reporting bureaus generate revenue by issuing credit reports to both consumers and lenders. However, the Federal Trade Commission requires all three bureaus to provide you with a free copy of your report at least once a year. For more information on obtaining an official copy, visit the FTC website.

**Myth #4: The bureaus make it difficult to correct credit report errors**

**The truth: **While it’s true that contacting the credit bureaus isn’t always easy, they’re generally very responsive to allegations of errors on your report. To correct the error, they’ll ask for multiple forms of identification to make sure it’s really you. Once they have identified your identity as authentic, you simply need to inform them of the errors and provide proof where necessary.

**Myth #5: Firms are too powerful a force in the financial world**

**The truth: **The big three bureaus do have a lot of power, but their power is given to them by lenders who depend on the bureaus’ information to make sound lending decisions. And their presence also helps consumers. Without a nationally recognized credit rating system, loan default rates would likely skyrocket, leading to much higher average loan interest rates. And the fact that there are three bureaus creates a system of checks and balances when it comes to credit score accuracy.

Credit reporting companies are indeed influential, but they still provide a valuable service to lenders, consumers, and the lending industry as a whole. Take advantage of your right to a free annual credit report. Then do what it takes to improve your credit score.

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