- Data provision is the process of sharing consumer information with major credit bureaus.
- Because providing data is not required, your credit reports may not reflect all of your borrowing activities.
- Credit reporting errors are common, so it is wise to review your reports regularly.
Credit reports play a huge role in the lives of American consumers. Lenders and other creditors use the information in it to assess your credit history and determine if you are able to manage debt. The data is also used to calculate
which has an impact on everything from the interest rate you pay on your mortgage to the cost
Experian, Equifax, and TransUnion base these reports on information provided by other lenders and creditors. However (and this may come as a surprise), they are not legally required to provide this data to credit bureaus.
Read on to find out what your credit reports and scores are like – and what you should be aware of as a borrower.
How does credit reporting work?
If you have ever obtained a loan or opened a file Credit card Account, you will likely have one or more credit reports. These documents record your borrowing and repayment history from seven to 10 years ago. Much like a school transcript showing how well you’re doing academically, a credit report shows your credibility as a borrower.
You can have multiple credit reports – one for each of the three major credit bureaus. These companies individually include hundreds of millions of consumer credit reports. But how do they get data on so many consumers? From financial institutions people with banks and borrow from them.
For example, let’s say you opened a credit card account with a major financial institution. Your card is used to make purchases, make timely payments, and pay off your previous statement balance each month. Once the lender shares or “provides” your data to credit bureaus – which is usually every 30 to 45 days – your credit reports will be updated to reflect your payment activity.
Credit scoring systems, such as FICO Score and VantageScore, run this data through their models to generate credit scores. These are three-digit numbers that represent the borrower’s probability of default over the next 24 months. When people borrow debt and pay it off (or don’t pay it off), they create a feedback loop of credit data that lenders use to evaluate applications and issue new loans.
What is a credit data provider?
A credit data provider is an organization that reports consumer credit information to one or more major credit bureaus. In other words, your credit reports don’t fill out themselves. The lenders you borrow from send your account activity to the credit bureaus, and they update your reports accordingly.
Furnished can include traditional banks and digital banks credit unionscredit card issuers, collection agencies,
and auto loan lenders. If the company is involved in financing, it is likely to provide credit statements. However, just because an institution provides credit data does not mean that it provides it to all three offices.
“Lenders are not required to provide consumer credit data,” according to Christian Wiedalm, CEO of Credit BloomAn API platform that enables businesses to integrate with credit bureaus. “But if they do, there is a registration and setup process for each credit bureau, which takes time and money, causing some lenders to submit data to only one credit bureau.”
This can create inconsistencies between credit reports, and thus credit scores. If your lender only works with one credit bureau, your reports from the other two will not record your credit activity.
“You might have 760 on Equifax and TransUnion, but only 710 on Experian.” Widhalm says. “Depending on where they’re pulling the data from, lenders could have a very different view of you from a grading perspective.”
How does the credit information process work
Furniture plays an integral role in the US credit system by sharing consumer data. But what kinds of information do credit providers give offices? Everything you find on your credit report.
Furnishers share account information including credit inquiries and overall credit availability, which are key components of your credit score. They also provide account activity such as outstanding balances and payment history. For example, if you miss payments, lenders can share this with the credit bureaus, and your results will likely take a hit. They also share your name, address, Social Security number, and other personal information so that your activity can be linked to your identity.
Your credit reports can also show other aspects of your financial history, including bankruptcies, debt collection from freight operations, foreclosures, and vehicle repossession. For example, let’s say you have an outstanding credit card balance and you stop making payments. Eventually, the issuer will write off your debt – which means it doesn’t expect you to pay it back – and sell it to a collection agency. In turn, the collection agency takes care of your debt and may continue to provide your delinquent account information to one or more credit reporting offices.
While lenders and other institutions are not legally required to provide credit statements, when they choose to do so, they are required to follow the regulations laid out in Fair Credit Reporting Act (FCRA).
In general, there are two overarching rules that a credit profile provider must adhere to under the FCRA:
- The information must be accurate and complete.
- Consumers must be able to dispute the information—and if they do, the provider must be able to conduct a thorough investigation of the dispute.
As a result, furnishings must have strict internal policies and controls in place to ensure accuracy and enable consumers to object to their data. For example, if you are going to challenge an undisclosed balance on your report, the provider is legally obligated to investigate your claim.
So, if furnishing is not required, why do establishments do it?
“Furnishing is beneficial to everyone, in terms of credit risk and cost of credit,” says Wiedhalm. “The more information available, the more accurate the lender’s ability to price risk – so lenders should suffer fewer losses and consumers be
You should get lower rates.”
Furnishing also encourages responsible financial behaviour. Borrowers who routinely make payments on time are rewarded for their efforts – their credit reports are updated to show their good habits, which improve their credit score. Conversely, borrowers who default will hurt their results, making it more difficult to access credit in the future.
How to make sure your credit data is accurate
We may live in an automated world centered around digital, but that doesn’t mean credit reporting is a perfect system. Mistakes are actually quite common.
“Thirty-four percent of consumers in the United States have an error or inaccuracy in their credit report, ranging from a misspelling of their name to an entire business line that isn’t theirs,” Widhalm says. “Your report can contain two mortgages but you really only have one. At best, this is a nuisance. At worst, mistakes can limit access to credit.”
Checking each of your credit reports is the only way to ensure that your credit data is accurate. This may seem like an unnecessary chore, but it is wise to monitor what is being shared with offices regularly. If you find an error, you can Dispute it and potentially improve your credit score.
Since lenders are not required to furnish, you may find that your good borrowing habits don’t register at all. If that’s the case, your only option is to switch to a lender that provides the data to the offices.