Credit Bureaus: Fact and Fiction

They wield tremendous power over your life - and the lives of every other bill-paying American adult. But how much do you really know about the main three credit reporting agencies?

Numerous surveys suggest the typical American knows very little about the credit bureaus other than that they control consumer credit profiles - and as a result, their purchasing power. And that is exactly how these credit reporting agencies want it, argues Dr. Randy Padawer, a clinical psychologist whose research into consumer credit has been featured in Smart Money Magazine and the bestselling FICO 850 seminar for The Motley Fool.

"The three major credit bureaus truly want consumers to believe that they've each been blessed with an officially sanctioned franchise," says Padawer, who has consulted for Lexington Law, a firm that helps consumers dispute errors and other questionable negative information from their credit reports.

The fewer facts you know about the credit reporting agencies, the more difficult it will be to resolve a problem when one shows up on your credit file. And odds are an error will appear. Nearly 80 of credit reports contain errors, and one out of every four contains errors serious enough to cause significant problems for consumers, according to research by the U.S. PIRG.

Here are some credit bureau misconceptions and the real facts behind each fiction:

Fiction 1: There are only three credit bureaus.

Fact: Many organizations are in the business of collecting, compiling and processing credit information.

Fiction 2: The big three credit bureaus are officially sanctioned by the federal government.

Fact: "There are no official bureaus," Padawer says. "While most Americans perceive their credit reports to have at least the same legal standing as their driving records, the truth is that the government had no role in establishing the for-profit companies which produce them."

Fiction 3: The three major credit bureaus all record the same credit information.

Fact: Different creditors often report to different reporting agencies. In fact, there is no law that forces them to report to any of the credit bureaus at all. Credit bureaus do not share information either, so if you find an error on your credit reports provided by all three agencies, fixing it with one of them does not mean it will automatically come off your other two credit reports .

Fiction 4: Consumer reporting agencies will act quickly to help me rectify an error or remove inaccurate negative listings from my credit file.

Fact: Federal law requires Equifax, Experian, TransUnion, and all consumer reporting agencies to complete an investigation into a consumer complaint within 30 days of when it was first made. The credit bureau may decide the disputed item remains on the report as is, revise but not delete the information, remove the listing, or deem the dispute frivolous. Given that the easiest option is to simply deem your complaint as frivolous, many consumers find that their legitimate disputes get dismissed.

Increasingly, frustrated and fed up consumers are turning to professionals like Lexington Law to help them resolve credit report problems. Anyone who has disputed a listing on their credit report knows the process can be long, frusterating and perhaps without results. Involving a credit repair professional can achieve faster, better results.

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It is possible to legally fix bad credit. To learn more about disputing the negative information in your credit reports, please visit Lexington Law, the trusted leaders in credit repair.

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