What is Equifax? How Credit Bureau Reports Impact Credit Card Approval

Oh, the ever-important credit score. It ranks at the top of my protected numbers list, which includes my Social Security number, Robinhood PIN, and essential Netflix password. 

But protecting and managing credit scores takes work. One of the top ways I manage my credit is by monitoring it and viewing my credit report, which is the document used to calculate your credit score. Equifax is one of the three nationwide credit reporting companies in the U.S. These providers are also known as credit bureaus. 

Equifax is one of three major credit bureaus in the U.S. that compiles reports to help credit card issuers and other lenders assess your creditworthiness.

In this article, I’ll cover the role of credit bureaus, the information Equifax uses to compile credit reports, and how your credit profile impacts credit applications. 

Without credit bureaus, lenders wouldn’t have the information they need to offer us credit cards and other financial products. While Equifax may not include our medical history, it stores some of our most valuable data. 

The Role of Credit Bureaus

Equifax is one of the three national credit reporting agencies in the U.S. Along with Experian and TransUnion, Equifax creates credit reports by collecting information about how consumers use their credit.

Before we move onto the nitty-gritty of credit bureaus, let’s dive into the history of Equifax. The credit bureau came from humble beginnings. In 1899, two brothers, Cator and Guy Woolford, began a door-to-door operation asking merchants about their customers and their buying behavior.

The Woolford brothers would note their findings about shopper payment habits in a ledger. These findings soon became “The Merchant’s Guide” and the publishings were sold to other merchants for $25. They also offered individual credit reports. 

The Woolfords’ Retail Credit Company exploded in growth over the next century or so and was renamed Equifax in 1976. As it did so many years ago, Equifax continues to collect information on consumer financial habits to compile and sell its reports.

Credit reporting agencies are significant because they provide the reports that are the basis for calculating credit scores and determining creditworthiness.

Credit bureaus not only provide a history of how consumers use credit, but they also help credit card issuers make smarter approval decisions. Credit reports also inform you of your own credit history, so you can determine whether to go after a financial opportunity or make some changes to improve your credit history. 

And it gives issuers the information they need to make credit decisions. For example, when someone applies for a credit card, the credit card issuer can quickly pull the customer’s credit report from one (or all three) of the major credit bureaus to establish terms and interest rates. 

How Equifax Compiles Your Credit Report

If you’ve ever seen a credit report, you understand how comprehensive and detailed it is. If you haven’t, I’ll explain everything that it includes.

Credit reports are like a summary of your financial lifestyle. They can tell you a lot about yourself and alert you where you need to improve your financial responsibility. 

Equifax compiles your credit report by collecting data from your creditors. It also uses inquiry history, collections, bankruptcy public records, and other personal information to provide a better view of your finances. That’s a lot of information, but it is necessary to paint the full picture of your credit standing. 

One area credit bureaus, including Equifax, dive deep into is credit accounts.

The credit account information you will find in an Equifax credit report includes:

• Open accounts, associated balances, and other historical data
• Closed accounts
• Types of credit accounts, whether they’re revolving, installments, or mortgages
• Payment history
• Total loan amounts

You should check your credit report every once in a while to spot inaccuracies. The report records and lays out your complete credit history. So you should be able to identify whether an account or a piece of information is supposed to be there or not. 

This is where disputes come in. If you spot a mistake, you can file a claim with the credit bureau and have the error either updated, deleted, or verified. Credit reports are updated once a month or at least every 45 days. 

So if Equifax or another bureau detects changes in your credit report, whether you close an account or dispute a claim, you will still have to wait to see those changes appear on your credit report. 

Equifax breaks down your credit report into sections to make it easier to read. To let you know what to expect, I’ll go through the main sections of a credit report and how it’s outlined. You can also check out a sample Equifax credit report here. 

How to Access and Read Your Report

All three major credit bureaus offer free copies of credit reports and you can get one report every 12 months directly from them. Finding your Equifax report is simple and you don’t need to jump through a lot of hoops to view it. 

Equifax offers reports through its myEquifax account. Sign up for an account and look for “Equifax Credit Report” on your myEquifax dashboard to receive your report.

You can also visit AnnualCreditReport.com to check your credit reports for free as often as each week. AnnualCreditReport.com allows you to get copies of reports from all three bureaus in one place. 

Once you receive your report, analyze its contents to address any areas of concern. The documents start with your personal information, including your name, address, Social Security number, and birth date. 

Then, your Equifax report breaks down into the following sections:

• Account Overview: Shows the length of your credit history and what types of credit lines make up your account. 
• Credit Score: Provides an insight score and a credit score with details on factors that are impacting your credit. 
• Employment Information: Offers current and previous employment data. 
• Alerts and Triggers: Details alerts received for fraud and bankruptcy public records. 
• Trades Summary and Account Status: Gives an overview of your credit standing and history. It shows total accounts, balances, credit limits, and account opening dates, among other details.
• Credit Inquiry History: Provides information about the inquiries you’ve had in the last two years. 
• Credit Accounts: Covers the most data — the majority of it numerical. It lists all your credit accounts, including paid-off ones, with information about account type, balances, scheduled payments, and credit limits. 
• Tradelines and Payment Attributes: Offers additional information about your credit accounts. Tradelines is an industry term for accounts included in your credit report.

Each of these sections includes valuable information about your credit status and history. And they all can be important for different reasons. 

For example, you may need to understand the inquiry history section on your credit report to realize why your credit score dipped a couple of points. You may also need to analyze your credit reports to decide if you can pursue future credit opportunities or make other financial plans.

But credit reports aren’t the only service Equifax provides. It also has a few paid services that consumers can add to their digital toolkit. 

If you’re interested in credit monitoring, Equifax offers a tool that monitors your credit report and sends alerts when a change occurs. You can also get free reports and monthly access to your credit score with its Equifax Core Credit solution. 

Unfortunately, hackers often target consumers to commit credit fraud and identity theft. That’s why the Equifax team also offers bundled services with identity theft protection included. Its identity theft features include a credit report lock and identity restoration services. 

Identifying and Disputing Errors

As I mentioned earlier, credit reports are not immune from errors. If you spot one, you should dispute it right away. But what are the common errors that can appear? I’m glad you asked because I have a few answers. 

Here is a list of errors you may encounter when reading your report:

• New credit accounts resulting from identity theft
• Personal information mix-ups, such as wrong addresses or phone numbers
• Closed accounts listed as open
• Accounts with an incorrect current balance
• Accounts incorrectly reported as late or delinquent
• Incorrect date of last payment, date opened, or date of first delinquency

When analyzing your report, you should especially check for identity errors, incorrect reporting of account status, and data management errors. All of the errors listed above fall into one of these categories. 

You have a couple of options after identifying an error. If it involves identity theft, you should consider freezing your account. Freezing your credit will restrict anyone, including financial institutions, from accessing your credit report to open any further accounts in your name. 

The other step you can take is filing a dispute with Equifax or the other two credit bureaus. Disputing errors doesn’t take much effort on your part because you can quickly file a dispute online or via phone call. Just make sure you have relevant documents on hand to confirm the inaccuracy.

Once you send the claim, you can expect a response within 30 days. Equifax will investigate and notify you of the results. If action is needed, the team will make updates to your credit report. You can always check the status of your dispute in your myEquifax account. 

Credit reports can determine the success or failure of your credit card application. Personally, I find managing and monitoring my credit reports and credit score boring and tedious work. But understanding them can increase your approval odds and even improve your other financial opportunities. 

Credit Score Calculation

Before I get into credit score calculations, it is important to note that everyone has multiple scores, including different versions of FICO and VantageScore (the two most popular credit scoring models). The most widely used model is FICO, so we’ll take a closer look at its components. 

The five metrics FICO uses to calculate your score include:

• Payment history (whether late or on time)
• Amounts owed
• Length of credit history
• Credit mix
• New credit activity

Payment history is the most important and makes up 35% of your score. This is why late payments can be so harmful to your credit score. To ensure you have a favorable credit score, you must be diligent with your payments.

The amounts owed category also weighs heavily on your credit score. Accounting for 30% of your score, it includes everything from credit utilization to the total number of accounts you have with a balance. 

The best thing to do here is to keep your credit utilization ratio — the amount you owe compared to your overall credit limits — below 30%.

The other three categories — length of credit history, credit mix, and new credit — account for 15%, 10%, and 10%, respectively. Having a long credit history, opening new credit lines only when necessary, and owning diverse credit lines can all help you increase your metrics in these categories. 

Issuers Rely on Reports to Determine Risk

Credit card issuers use credit reports to review your history and determine your creditworthiness. If you have a good score and history, it will show that you are financially responsible, making you less of a risk for the credit card issuer. 

But your credit score isn’t the only factor credit card companies consider to determine risk. They also look at your income, age, and employment status before approving your application.

How to Improve Your Credit Profile

If you view your credit reports and realize they aren’t great, don’t worry, nothing is set in stone. You can take some actions now to make sure credit card issuers will be impressed by your reports in the future.

Here are a few tips and habits you can implement for a better credit score and a more solid financial standing:

• Avoid late payments at all costs.
• Maintain lower amounts of credit card debt across fewer cards.
• Diverse your credit accounts and keep a lengthy account history. 
• Only apply for new lines of credit when needed because hard inquiries can impact your credit score. 

Although they may seem small, following these tips can turn your credit standing around in the long run. And if you want to go for the highest level, check out our guide on how to get an 800+ credit score. 

Your credit reports, including the one produced by Equifax, are some of the most important documents in your financial life. They show your financial status and credit responsibilities, so you can determine whether you should apply for that new credit card or try to improve your score to get a better interest rate. 

Anyone can build and maintain a healthy credit profile. I remember how daunting it seemed when I started on my credit journey. But step by step, I improved my credit responsibility. You can do the same, starting by accessing the information on your Equifax credit report.