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What Experian And Equifax Do?
If you’re looking to improve your credit to get your finances back on track or qualify for a lending product, you will need to understand the basics of your credit report. However, many people don’t appreciate that Experian and Equifax are two different credit bureaus.
Both of these companies accumulate and research credit details of each individual and then use this information to rate the person’s overall ability to repay a debt. Experian and Equifax share the information they have gathered to lenders for a fee so the lenders can use the details to assess the creditworthiness of prospective customers.
Credit bureaus also collect data from credit histories to create credit reports. This includes credit products and transactions opened, closed and used in the last seven years.
How Experian and Equifax Affect FICO and VantageScore?
This is where many people start to get confused. Afterall, if you’re considering a new credit product, there may be a recommended or minimum FICO score or a guide VantageScore. These are different to the credit bureaus, but they do have a connection to the credit bureaus.
Essentially, both FICO and VantageScore are separate credit rating companies, which use the information accumulated by Experian, Equifax and, the other major credit bureau, Transunion to generate a credit score.
FICO and VantageScore use the credit bureau reports and proprietary algorithms to create numerical measurements of creditworthiness. These credit scores can vary from 300 to 850 and your score will impact whether you’re approved for new credit products.
This means that if you have positive Experian and Equifax reports your FICO and VantageScores are likely to be high. Conversely, if the Experian and Equifax information is negative, your scores will be lower.
How Does Experian Work?
Experian has been around for over 125 years and it is considered a crucial player in both consumer and business credit reporting. It is used in over 100 countries providing:
- Credit scores and reports
- Credit monitoring services
- Fraud alerts
- Identity theft protection
- Credit report disputes
- Credit support
- Loan and credit card matching tools
- Business credit services
- Educational resources
As an individual, there are a couple of Experian services that you can use to help your financial profile and creditworthiness.
This is a program which allows those with no credit history to create their own credit report. This is important as many people become stuck in a vicious cycle of being unable to get credit because they don’t have a credit history and being unable to get a credit history because no one will give them credit.
Experian Go provides you options to get recognition for bills you’re already paying. After you sign up and verify your identity, Experian will ask several questions about your bills, income and typical spending habits. It will then offer suggestions on ways to build credit.
Experian Boost allows people who have been making on time payments for streaming, utilities, telecom and rent to have them factored into their Experian credit file.
This is a free feature included in the free Experian membership package, which means that you can instantly improve your credit score and access your Experian credit report.
This is a paid service owned and operated by Experian. It provides 360º alerts and monitoring including checking to see if your email, phone number and address are exposed online. There is also dark web monitoring, alerts for change of address and loans, and other financial account activity.
There is also a premium level to this service that offers more comprehensive protection.
How Equifax Works
Equifax is another global credit bureau, providing consumer core solutions including:
- Equifax Value: This includes credit score and credit reports, credit monitoring, auto fraud alerts, identity theft protection and blocked inquiry alerts.
- Equifax Premium: This includes monthly access to credit scores and reports, credit monitoring, auto fraud alerts, identity theft insurance and restoration, credit report locks, lost wallet assistance and stolen funds replacement.
Equifax reports have groupings for open and closed accounts, so you can easily view current or old credit data. The credit report is broken down into several sections including:
- Personal information
- Inquiries from potential creditors
- Installment loans
- Revolving accounts such as credit cards or department store charge cards
- Consumer statements
- Public records including bankruptcies
- Other accounts
Like Experian, Equifax also has some consumer packages and services. These include:
- Equifax ID Patrol: This is a paid service that provides daily Equifax credit report, credit report lock and three bureau credit monitoring with annual access to your credit reports from the other bureaus.
- Equifax Complete Premier: This includes all of the ID Patrol features but also credit score monitoring and daily Equifax credit scores.
- Equifax Complete Family: This provides the benefits of Complete Premier, but there is coverage for a second adult. Additionally, there is access to one bureau credit locks and monitoring for any children.
Main Differences Between Experian And Equifax?
While they may appear very similar, there are some key differences between Experian and Equifax.
One of the most obvious differences between Experian and Equifax is in the layout of the credit reports.
Experian has sections for personal information, employment and inquiries, but the accounts are all included in one section. Equifax divides the accounts into open and closed, which makes it easier to scan for current accounts.
This is a less obvious difference, but it is still significant. Experian calculates scores on a scale of 0 to 1000, while Equifax scores on a scale of 0 to 1200. They also use different algorithms to calculate scores, so you may notice differences in your score.
For example, on the Experian scale, you’ll need a score of at least 650 to be considered good, while you’ll need at least 670 on Equifax.
Another invisible difference between these agencies is the data collected. Some lenders only report to Experian or Equifax.
So, you may have loan A which is reported to Experian, while loan B is reported to Equifax. This means that your credit score may differ even with the same credit history.
Experian has low cost membership options including IdentityWorks which can help you to be aware of suspicious activity. If you upgrade to Premium, you can also have ID validation alerts and account monitoring.
On the other hand, Equifax’s identity protection services are a little limited. There is still monitoring and assistance, but Experian offers a higher standard of service.
Both platforms offer credit lock, but you’ll need an Experian IdentityWorks subscription to access this feature, while it is free with Equifax. Experian also offers FICO score simulators and FICO score tracking.
Experian offers phone support 6am to 8pm PT Monday through Friday and 8am to 5pm on weekends. However, there are reports that you need to be prepared for a long hold time to speak to an actual person.
Equifax has several phone numbers relating to different issues, but there is no general queries line. If you have a general query, there is an online chat portal available 8am to midnight ET Monday through Friday. Again, you need to be prepared for long wait times.
Why is My Equifax Score Lower than Experian?
The difference between Equifax and Experian scores are due to the companies using different algorithms. The precise scoring formula used by either company is not publicly available, but we do know that the companies take different factors into account when calculating scores.
For example, Experian considers the total amount of your outstanding debt, the types of accounts, the length of accounts and the number of late payments. On the other hand, Equifax looks at your payment history, the types of accounts, credit length history and credit utilization.
Which Credit Score Matters More?
Generally, there is no clear answer to whether Experian is more important than Equifax or vice versa. Your report with both agencies is vital for your personal finances. However, when you are seeking new credit products, which bureau is more important will be determined by which one the lender uses to determine your eligibility for loans, mortgage, credit cards and other financial products.
Some lenders will only pull your Experian credit report, others will pull your Equifax report. So, if the lender for your new car loan relies on Experian, it is the most important report.
Unfortunately, lenders rarely disclose which bureau they will use, so you may not know in advance. It could be Experian, Equifax, TransUnion or even all three.
Your Experian credit score is used by lenders to assess your creditworthiness.
Your Experian credit report can only be as accurate as the information that has been provided to them. If a lender reports inaccurate information, then your report will not be accurate. Therefore, it is important to check your report for any errors.
A good Experian score is 650 or above.
You can request a free copy of your Equifax credit report once per year and this will provide you with your Equifax credit score.
If a lender pulls your Equifax report, it could impact your score as it is logged as an inquiry. However, when you check your Equifax report, it will not affect your credit score.
Equifax typically updates credit scores once per month after all the new reporting activity has been logged.