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Why A 3 Bureau Credit Report Is Better Than Free Credit Reports
By EchoBay Loans Staff Writer

All credit reports are not created equal. The three national credit bureaus-Trans Union, Experian & Equifax-report largely the same information, but differences almost always occur between the data entries contained in each report. That's why it's very important to review your 3 in 1 credit report regularly, rather than just a free credit report from a single bureau.

What types of differences?

3 in 1 credit reports merge the data provided by all three bureaus into a single format.
From this vantage point, you can easily spot the different entries being reported by each bureau.

They can be small, such as a one bureau listing all of your previous addresses and another listing only a few. These types of inconsistencies won't affect your credit score. But large differences pop up with regular frequency and are what cause score variation from bureau to bureau. Older & closed accounts showing up on one report and not another are examples of the inconsistent information you'll find between bureaus in your 3 in 1 credit report.

Why don't all three bureaus have the same data?

Credit bureaus have evolved over the years to be national in nature, but they didn't start out that way. Originally each bureau tended to dominate a regional area and some vestiges of this old structure still exist. Even now some business customers continue to report their payment data to the bureau that may have purchased their previous local vendor. That's one reason why a bureau might show an entry that the other two don't.

The creditor companies, the ones who supply the payment history data to the bureaus, may have other reasons for not reporting to all three bureaus, regardless of regional status. The most important types of accounts, like home & auto loan lenders, do provide data to all three, but smaller accounts (local or regional stores for instance) sometimes find it easier to choose a single bureau or may have special vendor agreements with only one bureau.

Product line specialties also play a role in the reasons that differences exist. All the bureaus offer similar product rosters to the same industries, but there are stronger players in some markets over others. One bureau might sell to more used auto dealers, and another to cell phone companies for example. If you carry accounts focusing on certain areas, the dominating bureau in that category might be the only one reporting.

Bottom line: Each bureau's information should be treated as part of your entire credit picture.

3 in 1 credit reports in mortgage lending

Mortgage and refinance lenders may prequalify a borrower with a single bureau report, but for the lending decision itself, it's nearly universal to use a 3 in 1 credit report. How does a lender decide which score from a tri-merged report to use? As easy as it sounds, lenders decide your loan's rate, down payment and other terms by looking at the middle score. The middle score assumes a sort of an average between the high & low scores.

Just because a lender uses the middle score, however, you're not off the hook for negative entries from the bureaus whose scores were "discarded." No lender wants to make a loan decision without as complete a picture as possible. Your lender will look at all three reports, and you'll likely be required to bring current, pay off or otherwise handle any negative account entries from all of the bureaus.

The free credit report: a preliminary look, but incomplete

A free credit report can give you a good start in knowing what a particular bureau says about your creditworthiness. A paid 3 in 1 report, on the other hand, tells you everything you need to know to manage your credit profile correctly. When you review your entire credit picture in advance of applying for a loan, you're more likely to get a better deal.


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