When you purchase an item on credit, take out a loan or get a mortgage, the credit card company or bank that lent the money is familiar with your payment terms and history. That make sense, but there is also another entity that gets to learn all about you, a credit bureau.

So, who are these elusive data aggregators and why are they collecting such personal financial information? Credit reporting agencies collect a wealth of financial and personal information about about your wealth. They then offer the information for sale in the form of a credit report. In this article we'll explain what a credit report is and what information is being harvested. Then we'll examine some of the key harvesters to see if one is worthy of investment.

Background: What Are Credit Reports?
A credit report is a compilation of certain personal and financial information on a given individual. The document provides a snapshot of that individual's financial health as well as their payment history.

It contains a surprising large amount of information. It begins with your name and social security number. These agencies will also collect data on any open accounts you have. This includes any credit cards the person has open, whether there's a balance on the card or not. Open accounts also include information on car loans and home mortgage balances. Information such as the account number, bank that made the loan, the date the loan was taken out, and again the outstanding balance may be available.

Reports will also likely contain information about any accounts that are currently in collection as well as their status. Judgments or liens against a person's property may also be revealed as might any bankruptcy filing information. (To learn more, see The Importance Of Your Credit Rating and Check Your Credit Report.)

The Big Three Credit Bureaus
The "big three" in the business are Equifax (NYSE: EFX) and then two privately held companies Trans Union and Experian. Equifax may be the best known of the major reporting agencies. It has a terrific reputation for accuracy, and it has been around for more than 100 years. It is also the only publicly traded credit reporting agency of the big three.

In Equifax's most recent third quarter, the company earned $67.9 million (48 cents per share). That's down sharply from the $78.9 million (61 cents per share) it earned in the comparable period last year. However those numbers are a bit deceiving, because in last year's quarter it received a boost of about a dime per share from the reversal of tax reserves and litigation matters. Meanwhile, its revenue increased about 25% from $394.6 million in the comparable period last year to $492.5 in Q3 this year.

In terms of future earnings, Wall Street expects Equifax will earn $2.30 per share this year and $2.56 in 2008. That implies a growth rate of about 11.3%. Based upon this growth expectation and the current share price, I think there is some upside potential for the stock - perhaps 10% or so from current levels.

The Bottom Line
Credit reporting agencies collect a wealth of personal information on individuals and then sell that data to potential lenders. Of the big three credit bureaus, only Equifax is publicly traded. Based upon its growth possibilities in the next year, I think the shares would be more fairly valued in the low $40 range.

For related reading, check out How Credit Cards Affect Your Credit Rating.

Related Articles
  1. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  2. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  3. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  4. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  5. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  6. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  7. Credit & Loans

    5 Credit Cards For the Super Rich

    Understand the difference between an average credit card and an elite credit card for the wealthy. Learn about the top five credit cards for the super rich.
  8. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  9. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  10. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!