Experian vs. Equifax: An Overview
Experian and Equifax are the two largest credit bureaus in the U.S. Both companies collect and research credit information of individuals and rate the overall ability to pay back debt. Credit bureaus like Experian and Equifax provide the information they gather to creditors for a fee. Lenders, in turn, use the information in the reports to measure a prospective credit applicant's creditworthiness.
Credit bureaus assemble the data from a person's credit history to create a credit report, which can include any credit products opened or closed as well as transaction history within the last seven years. Credit bureaus take the financial history and using algorithms, create a numerical measurement of a person's creditworthiness. The numerical value is called a credit score, and it can range from 300 to 850 depending on the model used to create it. A credit score impacts whether someone will get approved for a credit product, including a loan or credit card. Credit scores are used by lenders to determine the size of the loan they're willing to make as well as the interest rate to charge a borrower. Credit scores can also come into play when applying for a rental apartment or lease as well as employment.
Although we'll explore the differences between the information provided by Experian and Equifax, they do collect and share some of the same information including:
- Personal data, which includes name, birth date, address, and employer.
- Account summaries of loans as reported by creditors.
- Public records, which list any judgments against an individual, as well as bankruptcies and IVAs (involuntary arrangements).
- Previous credit checks and credit inquiries from creditors including a list of all of the credit applications that have been made by the borrower.
It's important to note that not all lenders report to both of these companies. It is possible to have a debt showing on one without it appearing on the other. Since each agency offers different services and features, we'll take a look at how they stack up against each other.
- Experian provides monthly data for each account including the minimum payment due, payment amounts, and balances.
- Equifax lists accounts in groupings of “open” or “closed,” which makes it easy to view current versus old credit data.
- Both Experian and Equifax rely on a FICO score, which provides a score from 300 to 850 based on an algorithm.
- If a creditor reports to Experian but not Equifax, the credit scores from the two agencies for that person will likely be different.
Experian indicates how much longer any given account will remain on the credit history. It also lists the monthly balance history for each account. Experian has a slight edge over Equifax because it tends to track recent credit searches more thoroughly.
Experian breaks down a credit report into sections which include:
- Personal information including past addresses
- Accounts, which include credit cards, loans, mortgages
- Inquiries, which include any creditors checking a report due to a recent application, for example
Experian provides monthly data for each account including the minimum payment due, payment amounts, and balances. More companies use Experian for credit reporting than use Equifax. This alone does not make Experian better, but it does indicate that debt is more likely to appear on Experian. It also means that to get the full picture of the credit history of a loan applicant, lenders would need to access both credit reporting agencies.
How Experian Calculates Credit Ratings
- The total amount of outstanding debt
- Number of late payments
- How long the accounts have been opened
- The types of accounts such as a charge card versus a car loan
Experian's credit reports are more than a number, however. Instead, Experian provides lenders a thorough look into a person's credit history, which includes every credit product or debt that a person has opened or applied for to analyze how that person managed that debt.
Also, lenders often create their own credit scoring models based on a person's credit history. As a result, the information in a person's credit report can be interpreted differently by creditors.
Also, even when Experian and Equifax have the same information, a person’s credit score can be wildly different. It is possible to have a poor score with one agency and an excellent score with the other. The lack of consistency can sometimes be due to how lenders report credit to credit bureaus. If a creditor reports to Experian but not Equifax, the credit scores from the two agencies for that person will likely be different. There is no indication that either of these agencies gives more “poor” or “excellent” scores than the other.
Equifax lists accounts in groupings of “open” or “closed,” which makes it easy to view current versus old credit data. Also, Equifax provides an 81-month credit history or approximately seven years. Equifax breaks down a credit report into sections which include:
- Revolving accounts, which include credit cards and charge cards from department stores
- Installment loans such as car and personal loans
- Other accounts, which might include companies that are used to collect debts on behalf of creditors
- Consumer statements, which can be added to explain an item on a report
- Personal information such as address history
- Inquiries from potential creditors
- Public records such as bankruptcy
- Collections, which are accounts that have been charged off and sent to collection agencies due to lack of payment
How Equifax Calculates Credit Ratings
Equifax also relies on FICO for its credit scoring model. According to the company's website, Equifax states that several factors impact a score including:
- Payment history
- The types of accounts
- Credit utilization, which is how much credit is available versus how much credit has been used
- Credit history length
Data breaches have the potential to occur at both credit agencies. In 2017, a data breach at Equifax occurred due to a cyber attack, which may have put financial data on 145 million Americans at risk. The breach is reported to have occurred between May and July of 2017 but wasn't announced to the public until September that year. As a result, Experian experienced an enormous amount of negative press that ultimately resulted in the CEO of the company to retire. In 2015, Experian also had its own data breach whereby 15 million of its customer's social security numbers were at risk.
The popularity of Experian among lenders makes it more universal, but Equifax provides some essential information its competitor doesn't. The difference in credit scores at both agencies can be a concern. If one agency provides a particularly low score on an account, no one should assume that this is due to minor differences in how they report. Some creditors may not have reported to both agencies, or one may simply have inaccurate information.
A person may add a note to credit reports explaining unusual circumstances and clarifying issues. Lenders may consider this when analyzing creditworthiness. Both Equifax and Experian allow these notes to be added.