Who Reports to Credit Bureaus?
A credit report is a bit like an academic report card, only instead of reporting how one is doing in school, it conveys how one’s doing managing their credit. It does this by reporting account information supplied by creditors, similar to the way instructors supply grades that represent how well a student is doing in their courses. But instead of assigning a letter grade or numeric grade point, creditors report account activity to the consumer credit bureaus (the agencies that produce credit reports). Information such as payment history, how long an account has been open, credit limit, account balances, account opening and closure dates, and more.
Potential creditors use the information in credit reports to make better-informed decisions about whether to extend applicants credit, similar to how a university admissions department might use a student’s high school report card to help decide whether to offer a student admission. But not every business or service provider you deal with has a say in what appears in your credit reports. There are specific rules and regulations regarding what can and cannot be reported, how information should be reported, and strict requirements that must be met by any entity wishing to become a “data furnisher.”
REPORTING IS 100% VOLUNTARY
No creditor or lender is required by U.S. law to report any consumer information to any of the three major consumer credit bureaus (Experian®, Equifax®, and TransUnion®). However, if a creditor or lender chooses to be a data furnisher and is approved to be one, they are obligated to abide by legal guidelines established by the Fair Credit Reporting Act (FCRA). These guidelines obligate furnishers to (1) furnish complete and accurate information and (2) thoroughly investigate disputes consumers may have about the accuracy of the data being furnished.
Even if a creditor or lender chooses to be a data furnisher, they are not obliged to supply account information to all three of the major consumer credit bureaus. They may choose to report to only one of them or any combination of the three. This is one reason why the information found in your credit report from one credit bureau may not exactly match what’s in your credit reports from the other two.
WHAT’S IN IT FOR DATA FURNISHERS?
Reporting consumer data to any or all of the major consumer credit bureaus can be a costly proposition for a business—a major reason not all businesses that extend credit to their consumers choose to be data furnishers. In order to even be considered, a business must apply with the credit bureau(s) it wishes to report to and meet the requirements of each individual bureau.
TransUnion, for example, requires a data furnisher to have at least 100 accounts, so if you’re a small business with less than 100 consumer credit accounts, you won’t qualify to report to TransUnion. Equifax, on the other hand, does not have a minimum-account barrier to entry; however, data furnishers that report fewer than 500 accounts per month are required to purchase a monthly subscription to Equifax’s Automated Data View tool.
Given it costs a data furnisher precious time and money to report consumer account activity, why should they even bother? Well, the primary reason is that, if you’re in the business of extending credit to consumers, accurate credit reports that help paint a trusted picture of an applicant’s creditworthiness are worth their weight in gold. This information could help a business make better-informed decisions on who to extend credit to and who to decline. Making better decisions in this area could save a company a great deal of money by minimizing losses and how much time and money they need to spend on collection efforts.
Another reason to become a data furnisher is it provides a lender leverage in collecting the money it lends. If a consumer knows that their lender reports account activity to one or more of the credit bureaus, they may be more inclined to make consistent, on-time payments on their debt. If they don’t, a data furnisher can report their account as past due, which could adversely affect that consumer’s credit score and their ability to get more credit in the future.
ENTITIES THAT TYPICALLY REPORT INFORMATION TO CREDIT BUREAS
As mentioned, anyone who meets a credit bureau’s criteria, pays any associated fees, and follows reporting guidelines can technically become a data furnisher. But the truth is that, for many, even though they may qualify to furnish data, it may not make financial sense for them to do so.
Here are some typical data furnishers that are likely to report customer account information and activity:
- MAJOR CHARGE AND CREDIT CARD ISSUERS: These companies are in the business of extending credit and collecting what they’re owed, so they’re almost certainly going to want credit reports to be accurate—and to use their credit-reporting capability to incentivize customers to pay them back. What’s more, one of the benefits of using a credit card is that it helps a card member build a payment history, a major factor in calculating credit scores. But a consumer can only build a credit history with a credit card if the card issuer reports their account activity to the credit bureaus. So, if you’re applying for a credit card to help build a credit history—especially if it’s a secured credit card—make sure to check with the card issuer to verify they report account activity to one or more of the credit bureaus.
- RETAIL AND GASOLINE CHARGE AND CREDIT CARDS: These closed-loop credit and charge cards also typically report account activity. In fact, some consumers who don’t have much credit history or experience use these types of cards, which are typically easier to get than major open-loop charge/credit cards, to help them build a credit history.
- BANKS AND OTHER COMMERCIAL LENDERS: This category includes mortgage lenders, automobile financing companies, student loan providers, and more. If you take out a loan with a bank or other major lender, chances are the loan and your payment history will be reported to one or more of the consumer credit bureaus. These types of loans are typically installment credit; however, they could also be revolving credit, such as a revolving line of credit.
- COLLECTION AGENCIES: If a delinquent account is sold to a collection agency, the collections account can be reported by the agency to the credit bureaus and appear in your credit reports. Because collection agencies are data furnishers, they serve as a reporting avenue for companies that are not data furnishers. So, for example, if you owe your doctor $500 for services and don’t pay, since medical providers typically are not data furnishers, your doctor’s office would probably not have the ability to report the debt you owe as past due in your credit reports. However, if they sell your debt to a collection agency, it will likely show up in your credit reports as a collections account.
ENTITIES THAT TYPICALLY DO NOT REPORT INFORMATION TO CREDIT BUREAS
These entities typically don’t report information to the major consumer credit bureaus. However, as mentioned, they always have the option of selling past-due accounts to a collection agency, and that agency could then report the debt as a collections account.
- MEDICAL PROVIDERS: Hospitals, doctors, medical offices, and other providers do not typically report consumer account information. Keep in mind that, if you pay for a medical service with a credit card and then don’t pay, it is the credit card issuer you owe money to, not the medical provider. And most credit card issuers are data furnishers.
- LANDLORDS: Landlords may check your credit reports before deciding to rent to you, but they typically do not report your rent-paying behavior to the credit bureaus.
- UTILITY COMPANIES: The good news is that, if you miss an electric bill payment or two, it probably won’t show up in your credit reports unless your account goes to collections. The bad news is that utility companies tend to write off delinquent accounts relatively quickly. So, along with having your power or water shut off, you could also find a collections account listed in your credit reports if you don’t make consistent on-time payments to utility providers.
- GOVERNMENT AGENCIES: Currently, the only public records allowed to appear in credit reports are bankruptcies, both Chapter 13 and Chapter 7 types. However, governmental agencies that maintain public records, such as bankruptcy courts, do not report to credit bureaus; credit bureaus collect this information on their own and include it in credit reports.
- PAYDAY LOAN LENDERS: Payday loan lenders typically don’t check a borrower’s credit reports, and they don’t usually report a borrower’s loan activity, either. Unless, once again, the borrower defaults and the loan gets sold to a collection agency.
- INDIVIDUALS: That disgruntled friend threatening to ruin your credit if you don’t pay back the $50 he lent you is not likely to meet data-furnisher criteria—or be willing to shoulder the cost to become one. Still, even though they can’t post the debt in your credit reports, you may want to pay them back before you lose a friend.
The fact that data furnishers report account activity for other potential creditors to see serves as incentive for consumers to make consistent, on-time payments. Just remember that, even though some creditors may not report your account activity to the credit bureaus, they might still affect your credit if they write off your account and sell it to a collection agency. So, it’s important to make every effort to make consistent, on-time payments to all of your creditors, not just the ones that are data furnishers.