Credit reporting agencies keep credit reports on file for each and every consumer who owns a federally-issued SSN or Social Security Number. You must be wondering about what constitutes a credit report file. Well, a credit report file contains all the information about the financial debt of an individual, including all the accounts details of their current and previous debts, the types of loans that they took out, the terms involved and their payment history in detail. When an individual fails to make timely payments towards a particular loan, the creditor opts to send a report of delinquency to the credit reporting agencies so that it soon gets reflected in the credit file of the consumer.
In the US there are 3 credit bureaus that act as the house of all information and they report to the creditors who are reviewing the requests for credit. Suppose you’re a credit lending institution and your debtor has defaulted on a specific loan, you can gain leverage by recouping that bad debt by reporting it immediately to the 3 credit bureaus. On the other hand, if you’re a small business with few debtors, you will need to use a middleman and then pay him a fee to report all such payments to the credit bureaus.
The entire process of reporting to credit agencies – A look into the details
Companies who report consumer payments to the credit bureaus can become “first-in-wallet”. Since managing risk is a main part of your business organization, you will always be in search of some of the most effective tools that will have the potential of making a noteworthy effect. When you report the account receivables data of your consumers to the credit reporting agencies, you can reduce the chances of recurring late payments and defaults.
- Getting started: It is not that consumer activities are automatically sent to the credit bureaus. All business organizations first need to create an account with the respective credit bureaus and then start transferring consumer information to that particular service. To make sure that a business knows the process of reporting information in an accurate manner, the credit reporting agencies conduct inspections before they sign a contract with a particular business. There are situations when third-party agencies will become the link, seeking business and helping them establish a strong relation with the credit bureau.
- The details of reporting to the bureaus: The business firms are supposed to report some of the details of the consumer activity to the credit bureaus. They report things like credit card accounts that have been opened suddenly and then closed, the total number of accounts that have been opened by the consumer presently, the detailed addresses of each account as this helps the bureaus to know the number of times the consumer has moved, the status of each payment (whether late or on time) and any other issues that rise out of consumer credit activity.
- The importance of accuracy and appropriateness: The details of the credit report of a consumer come from all the information that has been reported by the business firms. The information that finally appears on the credit report can assess the quality of a consumer’s credit and the amount that a bank is willing to lend to the person. Due to this, the business firms should report information as appropriately as is possible to avoid hurting the consumer’s credit report.
- The requirement for rectifying errors: Business organizations are given the permission to directly make rectifications with the credit reporting agencies but the consumers are individually responsible for verifying their information too. When a consumer sees that the information on his credit report is wrong, he has to gather enough proof of the fact that the report is actually inaccurate and then contact the bureau and the business. For instance, if the consumer sees that the credit account that was closed 4 years ago is still showing as ‘open’, he should notify both the bureau and the credit card company about this error to ensure immediate rectification.
- Resources of consumers: The Federal Fair Credit Reporting Act covers the entire activity of business reporting of consumers and the consumer credit reporting even falls under the FTC’s oversight. When the credit reporting agency fails to correct incorrect information is shows unwillingness to help the consumer in making changes, the consumer can get in touch with the FTC with the problem.
Businesses when facing huge amounts of commercial debt can get out of it by signing up with a debt consolidation company. However, they should make sure that they make timely payments towards their debts so that they don’t further hurt their credit score. A tarnished credit score will bar you from getting favorable lines of credit in the near future.