April 01, 2021
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:
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.
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.
After realizing he couldn’t pay back his outrageous film school student loans with rejection notices from Hollywood studios, Sean focused his screenwriting skills on scripting corporate videos. Videos led to marketing communications, which led to articles and, before he knew it, Sean was making a living as a writer. He continues to do so today by leveraging his expertise in credit, financial planning, wealth-building, and living your best life for Credit One Bank.
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