Understanding How Credit Information Is Reported

In order to effectively protect your credit history, you must first understand how credit information is reported to the consumer reporting agencies. The consumer reporting agencies (Trans Union, Experian, Equifax and CSC Credit Services) receive credit related information and store that information in sophisticated databases. Those that provide credit information to the agencies are known as "furnishers." Furnishers are typically lenders (such as those that provide revolving credit lines, mortgages, student loans and the like) but may also include others like public information venders that collect and provide public record information (such as judgments and bankruptcies) to the consumer reporting agencies.

One common misconception is that when furnishers report your credit information that information posts directly to your "credit report" which in turn is provided to potential creditors when you apply for new credit.  This misconception is wrong for many reasons all of which relate to how the agencies collect, sort and then disseminate credit information.

First, furnishers do not report information directly to your credit report.  Instead, furnishers report a collection of identifying information (i.e. first name, last name, social security number, address, date of birth, place of employment, etc.) along with the credit information they have associated with that identifying information.  For example, Jane Doe has a credit card with American Express.  American Express maintains a database of information related to that credit card account, including the identifying information of the person liable for that account, the account balance, credit limit, payment history, open date, and other related information.  On a periodic basis (usually monthly), American Express reports the information it maintains to each consumer reporting agency with which American Express has contracted to provide information.  American Express sends this data into the agencies' databases.

Once received, the agencies' databases then apply a set of complex algorithms (or sorting rules) to this data.  The algorithms seek to match the identifying information to other identifying information they already maintain in their database.  If matched, the account information which the furnisher reported as associated with that identifying information becomes a part of what the agencies refer to as a "credit file."  If not matched, the information may create an entirely new credit file.  So, back to our example....

Let's say that Jane Doe has the following identifying information:

First Name:  Jane

Middle Name:  Mary

Last Name:  Doe

Maiden Name: Smith

Address:  5555 Main Street,  Indianapolis, Indiana

Social Security Number:  111-11-1112

Date of Birth: 01-01-70