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#Introduction to How 3-in-1 Credit Reports Work

When it comes to your credit, a little discipline and diligence go a long way. See more banking pictures.

Credit reporting agencies -- also known as credit bureaus -- are private companies that collect information about your credit history from lenders like banks. credit card companies and student loan agencies. There are three major credit reporting agencies in the United States: Equifax, Experian and TransUnion.

When you apply for credit from a new lender (perhaps a credit card, home mortgage or a car loan), the lender requests a copy of your credit report from all three reporting agencies. Since credit reports provide the most detailed and accurate picture of your creditworthiness, the lender will base his or her decision primarily on what those reports say.

Each credit reporting agency works independently and many lenders don't report to all three companies. So it's possible that each of your three credit reports will be slightly different.

The scariest part about credit reports are that they routinely contain mistakes. A 2004 study by the Public Interest Research Group (PIRG) found that one out of every four credit reports contain serious errors [source: AP ]. These mistakes can ruin your credit history, lower your credit score and make it difficult to buy a house or qualify for a credit card.

These errors could be innocent reporting mistakes or a sign of identity theft. Nearly 10 million Americans fell victim to this type of theft in 2008, up 22 percent from 2007 [source: WalletPop ].

Before 1971, it was nearly impossible to know what information was on your credit report and whether or not it was accurate. That all changed with the Fair Credit Reporting Act, which made it possible, for the first time, to buy a copy of your credit report and dispute false information.

The Fair and Accurate Transactions Act of 2003 (FACTA) went even further, giving all U.S. citizens the right to request one free copy of their credit report every year from each of the Big Three credit reporting agencies.

Now there's a new product called a 3-in-1 credit report (or three-bureau credit report) that offers a side-by-side comparison of all three of your credit reports in one document. Credit reporting companies are touting this new document as the best way for consumers to see the big picture of their credit history, catch errors and identify the early warning signs of identity theft.

Learn more about ordering and interpreting a 3-in-1 credit report on the next page.