If you don't have wads of cash stuffed in a mattress or locked away in a safety deposit box, you've probably used credit to buy some of the finer things in life-a college education, a car, a boat or an engagement ring. Every purchase you make on credit and fail to repay in full within a stated time (or fail to repay at all) becomes part of your credit history. In the United States, there are three major credit repositories that maintain enormous databases that contain detailed personal financial information, including debt and loan payments, residences, and whether a company has taken action to collect on a debt. If you have ever purchased anything on credit, or were granted a loan, you are probably on file with one or more of these credit bureaus.

Experian (formerly TRW), Trans-Union, and Equifax are among the largest credit reporting agencies in the country. They gather credit information on a daily, weekly, and monthly basis from credit card companies, mortgage lenders, utility companies, department stores, and banks, and sell that information to companies that extend credit to consumers-mortgage brokers, finance companies, and department stores.

When they receive information, the credit bureaus add it to the existing data in your file (which is continuously updated). If you pay off a loan, for example, or are late with a credit card payment, this information is entered into your file and becomes available to companies that may purchase a credit history to check on your financial situation. Credit reporting agencies share their file information with each other which would lead one to believe that they are all storing the same information. However, certain data may not be reported or even updated to all of the companies. That is why it is important to check your credit on an annual basis to ensure the accuracy of the information they are reporting. Sometimes for example, a reported collection account (an account that is reporting that you stopped paying the debt) could have been repaid in full but still shows up as a delinquent credit account. By not checking your credit profile, you may be turned down for credit later on because the credit bureaus are still reporting the outstanding collection account.