Why do we only have three major credit bureaus?

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Vik V. asks:

Why do only three companies (Experian, Equifax, and TransUnion) control the credit report market? The service they provide is terrible and I don't know why there are not more companies in the market or why the government doesn't manage the whole thing (like Social Security numbers).

Credit scores can determine whether you qualify for an apartment and the interest rate you’ll pay on your loan.

The three major credit agencies in the U.S. – Experian, Equifax and TransUnion – will provide lenders with your credit report, which they compile using information about your lending history.

Credit scores are supposed to gauge your ability to pay back loans, but critics of the major credit agencies say they have no incentive to ensure your credit score is accurate and have questioned their ability to safeguard your personal information, especially since all three have been subject to major data breaches.

Aaron Klein, a senior fellow in economic studies at the Brookings Institution, said credit bureaus take your data and sell it to other companies, while giving you nothing in return.

“Every man, woman and child is a current or potential profit source for credit reporting agencies,” Klein said.

There were actually thousands of credit bureaus as late as the 1960s, but these companies began to consolidate in the 1970s and 1980s due to the rise of computerization, said Josh Lauer, a professor of media studies at the University of New Hampshire and author of the book “Creditworthy: A History of Consumer Surveillance and Financial Identity in America.”

“Some cities and towns had more than one credit bureau, and eventually that got whittled down,” Lauer said.

While in theory, greater competition could result in better service, some experts question whether more agencies would improve the credit reporting industry. Some proposed solutions? They say there could be a federal credit bureau, while others say that our credit system shouldn’t exist at all.

The history of credit bureaus

Credit bureaus began growing quickly in the late 19th century as the population expanded in cities and the U.S. started expanding westward, Lauer said.

“You had people moving into new and growing towns, and the problem was that local merchants didn't know who anyone was. They had new, strange customers coming into their retail stores,” Lauer said.

Local retailers wanted organizations to collect customer information to determine who they should offer credit to. But at the same time, smaller retailers were also reluctant to share information about their customers because they were afraid competitors would snatch those customers away, Lauer said.

“So it took some convincing to get merchants to actually provide the full identity and information about the people they're interacting with and trusting that the local bureau would keep that information sacrosanct,” Lauer said.

In the 1970s, well-funded companies began buying up local credit bureaus, eventually leading to the three major credit reporting companies we have now: TransUnion, Experian and Equifax, Lauer said.

Credit bureaus began digitizing consumer information during this period, which spurred consolidation, Lauer said.

“Computerization encouraged consolidation because computer systems were very expensive in the 1970s and 1980s. Only companies with deep pockets could bring the systems online and keep them running, which was also expensive because each system required custom software and technical staff,” Lauer said. “Once consolidation began, smaller non-computerized bureaus simply could not compete with the speed, reduced cost, and growing geographical reach of computerized credit reporting networks.”

Should there be more credit reporting agencies?

While there are numerous issues plaguing the industry, there are some advantages to only having a few credit bureaus.

“If you want to have accurate information, it's probably most efficient to have it in fewer places, rather than more places,” Lauer said. “The problem is that you have to be able to trust that place that collects that information.”

Many consumers have had to grapple with inaccuracies in their credit history.

“From the beginning, credit bureaus were designed to protect merchants. So they really weren't designed to help consumers. They were hostile to consumers,” Lauer said. “That relationship with consumers persists to this day.”

If you do have any errors on your credit report, it can be challenging to get them fixed.

“The credit reporting agencies are under no legal obligation to be accurate with their data, and when you tell them they've made a mistake, the only legal obligation they have is to check,” said Klein at Brookings.

The credit reporting agencies actually lose money ensuring accuracy, Klein said. “They make money pumping data,” he said.

Issues with the credit reporting industry have been compounded now that the Consumer Financial Protection Bureau, which holds financial institutions accountable, has been sidelined under the Trump administration, said Chi Chi Wu, director of consumer reporting and data advocacy at the National Consumer Law Center.

In early 2025, the CFPB dropped a lawsuit against TransUnion over alleged deceptive marketing practices. And TransUnion and Experian “have sharply reduced the share of consumer complaints they resolved in customers’ favor,” according to a ProPublica report in March.

TransUnion’s rate of resolving complaints in the consumer’s favor dropped in half by October 2025, while Experian’s rate fell to less than 1% last year compared to nearly 20% in 2024, according to that ProPublica report.

Security experts say that Equifax could have detected the vulnerability that led to the attack sooner and addressed it. TransUnion faced a data breach last year, which compromised the information of more than 4.4 million consumers. And in 2020, Experian South Africa also handed over personal information to a fraudulent client, which compromised the data of 24 million people.

“Usually when you have competition, that helps kind of tamp down on abuses, price hikes and other poor treatment of customers,” Wu said.

But there is no consumer choice with the big three credit bureaus, Wu said.

“You have to deal with all three. You can't say, ‘Well, Equifax, you sucked back in 2017, I'm only going to use Experian or TransUnion,’” Wu said. Some lenders use all the major credit bureaus, Wu pointed out.

However, Wu said she thinks having greater consumer choice still wouldn’t fix the underlying problems with the credit reporting industry. Wu said that credit agencies are inclined to take the side of debt collectors if you try to question inaccurate information about yourself.

One solution could be having a federal credit bureau, because the government would face political pressure to resolve cases, Wu said.

They also wouldn’t have the same profit incentives as the commercial credit bureaus, said Lauer at the University of New Hampshire. But the downside of that is you may not want the government to hold all of your information in a centralized database, he noted.

Klein thinks we should get rid of our current credit scoring system entirely and look at a consumer’s average daily bank balance over the past couple of years because that tells you a person’s true financial well-being.

“I think the answer to fixing credit reporting isn't to have more or less. It's to have none and not use it,” Klein said.

A report from FinRegLab, a nonprofit financial research center, found that customers’ “cash-flow information,” which includes details about their bank deposit accounts, provided more accuracy about how they managed their finances compared to credit reports.

“Whether or not you were 30 or 60 days late on a credit card four years ago is given way too much weight,” Klein said.

Wu also thinks that your bank account history could be a more accurate way of determining your trustworthiness as a borrower. Your credit history might suffer because you hit a rough patch – maybe you got laid off or you got sick, Wu said.

“Sometimes that's not a reflection of you as a borrower. It's just a reflection of bad luck,” Wu said.