Credit rating agencies, commonly called credit bureaus, have such potential to dramatically affect our lives, both positively and negatively, that it's common to think they are owned or operated by the government or have some official ties to authority. However, each of the major, well-known credit bureaus — Equifax, Experian and TransUnion — is independently owned, as is a fourth credit bureau, Innovis, that issues credit reports but not as its primary function.
TL;DR (Too Long; Didn't Read)
Each credit bureau has had a long and complicated history of ownership, but each is still free from any government ties.
Understanding What Credit Bureaus Do
Credit bureaus make it their business to be the place other businesses go to determine a person's creditworthiness. They gather oodles of data about every person, obtained from applications for credit, and from reporting businesses, and they give each person a credit score based on their data. They collect addresses when people move, so they typically have a string of previous addresses for each person. They also gather information from state motor vehicle records, so they usually have a list of cars people have driven too.
Not just anyone can access this personal information, however. Businesses that are considering lending someone money — for a car or home loan, for example – check to see how much money he owes and whether he pays his bills on time. They must have a person's permission to check their credit, though, and they need the person's Social Security number to do so.
In the early years of their operation, credit bureaus earned shady reputations by their drive to gather as much information as they could to make their business stand out. The lists of bad credit risks often included gossip about a person's private life, which angered consumers by being inappropriate and inaccurate. Additionally, investigators for the companies were sometimes accused of misrepresenting themselves and their purpose when doing their research. Passage of the Fair Credit Reporting Act in 1971 banned these questionable practices and gave consumers the right to access their reports and to correct errors.
Ownership of the Top Three Credit Bureaus
Experian, Equifax and TransUnion, the top three credit bureaus, have always been privately owned, independent companies, and so have the smaller credit bureaus, which number about 40 today. The smaller companies usually have a niche market on which they report, such as medical history, rental history, mortgages and insurance, or they mainly perform background checks. The top three credit bureaus report on a wide variety of information without going in depth on health care or insurance like the niche credit bureaus do.
Credit bureaus arose because, as businesses and towns grew, merchants no longer knew their customers personally and could be hoodwinked into trusting someone with credit who would rack up high debt, leave town and disappear only to pull the same scam in another town. By sharing information, merchants were able to know about such customers in advance and could refuse to give them credit.
Like most large businesses with long pasts, the top three credit bureaus have each changed hands many times through acquisitions, mergers and outright sales. To simply say who owns them today ignores how they came to be the owners, for none were started by an individual and passed down through the family.
Joining Local and London Roots: Experian
In 1897, Jim Chilton, a Dallas lawyer working in his uncle's law firm, convinced the merchants he represented to pool their data and share it with other businesses so they would have access to credit information on more people. Other credit-rating agencies existed, but Chilton had the novel idea of making not only a list of problem customers but also a list of good credit customers and insisting on accurate information instead of gossip. His idea caught on, and he left the law firm to form Merchants Credit Association, later renamed Chilton Corporation.
The Ramo-Wooldridge Corporation, founded by aerospace engineers Simon Ramo and Dean Wooldridge — who shared the cover of Time magazine in 1957 — joined with Thompson Products to become defense company TRW. They were also entrepreneurs at heart, interested in developing systems that could handle heavy data loads. TRW entered the credit rating business by acquiring Credit Data in 1967 and bought Chilton Corporation in 1988. In 1996, the credit portion of TRW was sold to the private equity firms Bain Capital and Thomas H. Lee, and the company was renamed Equifax.
Meanwhile, in the United Kingdom, tailors began pooling their customer information as early as 1803 and in 1826 joined with innkeepers and others to form the Society of Guardians for the Protection of Tradesmen against Swindlers, Sharpers and Other Fraudulent Persons, also known as the Manchester Guardian Society. In the 1970s, they combined with the credit services of Great Universal Stores and sold their data commercially through Commercial Credit (Nottingham) Limited, or CCN. As U.S. credit card companies entered the U.K. market, they noted CCN's success, and the two companies merged in 1996. Since people repeatedly called CCN "CNN" instead, the merged company went with the name Experian.
Assuring Equitable, Factual Information: Equifax
Equifax was started in 1898 by two brothers, Cator and Guy Woolford. Cator owned a grocery in Chattanooga, Tennessee and supervised the making of a list of creditworthy customers for the Retail Grocer's Association, which he paid for by selling the list to other retailers. It was so successful that Cator and his younger brother Guy, a lawyer, opened Retail Credit Company in Atlanta in 1899.
The company expanded into smaller cities in Georgia and made credit books for their merchants, but when business dwindled, the brothers cut back on the outlying cities. Realizing that the insurance business would pay much more for such information, they started with life insurance companies and then added auto and fire insurance. By 1920, Retail Credit had 37 branches in the US. In 1979, realizing that the company didn't specialize in retail anymore, they changed the company's name to Equifax to stand for "equitable factual information."
Beginning on the Rails: TransUnion
TransUnion's foray into the credit business began much later than the other two main credit agencies. In 1968, Union Tank Car Company, which leased and sold rail cars, created TransUnion as its parent holding company. In 1969, TransUnion acquired Credit Bureau of Cook County, Illinois, which was manually maintaining 3.6 million card files in 400 cabinets. Using their technical expertise, TransUnion was the first credit agency to replace the cards with an automated tape-to-disc transfer system that could update customer information much quicker, more efficiently and at less cost.
In 1981, TransUnion was sold to The Marmon Group, and by 1988, the company covered the entire U.S. TransUnion acquired TrueCredit.com in 2002 and went directly to consumers by offering them online services to improve their credit. TransUnion was spun off in 2005 as an independent, privately held company.
Knowing the Fourth Credit Bureau: Innovis
Innovis began as Associate Credit Bureaus in 1970 and became Innovis in 1997. Most people haven't heard of Innovis because it mainly helps businesses to verify information that they then use to make insurance offers and prescreened credit offers. You can request a credit report from them, but it probably won't be as detailed as one from the other three credit bureaus, and it won't include a credit score because Innovis doesn't calculate them.
As a small business, though, you may want to look into Innovis as well to see if they might be able to help you better understand your current and/or potential customers.
- TransUnion: Company History
- Experian: A Brief History of Experian
- Encyclopedia.com: Equifax Inc.
- Experian: What Is a Good Credit Score?
- Banks.com: The 4th Major Credit Bureau You Probably Overlooked
- Experian. "What Are Credit Bureaus and How Do They Work?" Accessed Nov. 2, 2020.
- Fair Isaac Corporation. "What's Not in My FICO® Scores?" Accessed Nov. 2, 2020.
- Fair Isaac Corporation. "How Do Credit Bureaus Get Your Information?" Accessed Nov. 2, 2020.
- Federal Trade Commission. "Free Credit Reports." Accessed Nov. 2, 2020.
- Federal Trade Commission. "Prescreened Credit and Insurance Offers." Accessed Nov. 2, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act § 602 Congressional Findings and Statement of Purpose." Page 1. Accessed Nov. 2, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act § 612. Charges for Certain Disclosures." Page 57. Accessed Nov. 2, 2020.
- Federal Trade Commission. "In FTC Study, Five Percent of Consumers Had Errors on Their Credit Reports That Could Result in Less Favorable Terms for Loans." Accessed Nov. 2, 2020.
Barbara Bean-Mellinger is a freelance writer who lives in the Washington, D.C. area. She has written on business topics for afkinsider.com, smallbusiness.chron.com, Harbor Style Magazine, the Charlotte Sun and more, as well as advertising copy and materials. Barbara holds a B.S. from the University of Pittsburgh and has won numerous awards in B2B and B2C marketing.