What is Experian?
Experian is one of the major credit reporting agencies. A publicly listed, international corporation, Experian collects financial information from people and businesses worldwide to assess their credit risk. Just like Equifax and TransUnion, the other “Big Three” credit bureaus, Experian uses that information to produce a credit history for each individual, and financial institutions draw from these reports when determining whether to extend credit such as a mortgage or a credit card to a customer.
Whenever someone takes out a new mortgage or credit card, leases a car or rents an apartment, or for any other reason needs to prove her financial health, she’ll have to undergo a credit check. It’s not enough to simply show a high income; a credit check will demonstrate whether she’s responsible and smart with her money, too. The company providing the credit report will be a credit reporting agency like Experian.
Experian collects data from financial institutions that show how their customers use financial products and compiles it into a credit history for each individual person. The resulting credit report is a detailed, straightforward listing of all credit-related actions taken by the customer, such as applying for new credit cards or missing a mortgage payment, with derogatory marks appearing alongside favorable or neutral details.
This information is synthesized into a credit score, a three-digit numerical expression of a person’s ability to pay back her debts. Most of the time, the credit score is enough to prove creditworthiness and is less expensive for lending institutions to pull. The lower a person’s credit score, the higher her risk, and the less likely she’ll be approved for new credit.
The most commonly used credit score is produced by the Fair Isaac Co., or FICO, which relies on the credit bureaus for data. Experian, as well as the other credit bureaus, also offers credit scores, using its own proprietary formulas that sometimes combine the FICO score with other metrics.
Experian and the other credit bureaus charge various fees to get access their credit history throughout the year, but under the Fair Credit Reporting Act (FCRA), customers are allowed to access their credit report for free once a year. Additionally, customers have the right to challenge inaccurate information they find in the report.
You can build up a strong credit history and get rewarded for doing so with a cash-back credit card.
Morty applies for a fancy new credit card with a high credit score requirement. He thinks he’s in the clear, so when his application gets rejected he decides to check his credit report. Using AnnualCreditReport.com, a website created by a statue in the FCRA and sponsored by Experian, TransUnion, and Equifax, he’s able to get a free credit report from each of the major reporting agencies. The Experian report shows a delinquency on a credit card payment that Morty knows to be an error. He calls up Experian and indicates where on the report the false delinquency showed up, and Experian removes it from his credit history. Morty’s credit score improves and he’s able to get the new credit card.