Definition, rules, impact on the credit report

  • Data provisioning 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 activity.
  • Credit report errors are common, so it’s wise to check your reports regularly.

Credit reports play a huge role in the lives of American consumers. Lenders and other creditors use the information they contain to assess your credit history and determine if you are able to manage your debts. The data is also used to calculate your

credit score

which impacts everything from the interest rate you pay on your mortgage to the cost of your

car insurance


Experian, Equifax and TransUnion base these reports on information provided by lenders and other creditors. However (and this may come as a surprise), they are not legally required to provide this data to the credit bureaus.

Read on to find out how your credit reports and credit scores look up – and what you need to be aware of as a borrower.

How the credit report works

If you’ve ever taken out a loan or opened a credit card account, chances are you have one or more credit reports. These documents capture your borrowing and repayment history as far back as seven to ten years. Just as a transcript illustrates your academic performance, a credit report demonstrates your reliability as a borrower.

You can have multiple credit reports – one with each of the three major credit bureaus. These companies individually host hundreds of millions of consumer credit reports. But how do they get data on so many consumers? At financial institutions, people do business with them and from whom they borrow.

For example, suppose you open a credit card account with a major financial institution. You use your card to make purchases, make timely payments and pay your previous statement balance each month. Once your lender shares or “provides” your data to the credit bureaus, which is usually every 30-45 days, your credit reports will be updated to reflect your payment activity.

Credit scoring systems, such as FICO Score and VantageScore, run this data into their models to generate credit scores. These are three-digit numbers that represent a borrower’s probability of default over the next 24 months. As people borrow and pay off debt (or fail to do so), they create a feedback loop of credit data that lenders use to assess applications and grant new loans.

What is a credit data provider?

A credit data provider is an institution that provides consumer credit information to one or more of the major credit bureaus. In other words, your credit reports aren’t filling up. The lenders you borrow from send your account activity to the credit bureaus, and then they update your reports accordingly.

Providers may include traditional banks, digital banks, credit unions, credit card issuers, collection agencies,

mortgage lenders

and auto lenders. If a company is involved in the financing, it probably provides credit data. However, just because an institution provides credit data does not mean that it provides it to all three bureaus.

“Lenders are not required to provide consumer credit data,” according to Christian Widhalm, managing director of Bloom Credit, an API platform that allows businesses to integrate with credit bureaus. “But if they do, there’s a registration and setup process for each credit bureau, which takes time and money, forcing some lenders to provide data to only one credit bureau.”

This can create discrepancies between credit reports and, therefore, credit scores. If your lender only works with one credit bureau, your reports from the other two will not record your credit activity.

“You can have a 760 on Equifax and TransUnion, but only a 710 on Experian.” said Widhalm. “Depending on where they pull the data from, lenders may have a very different view of you from a score perspective.”

How the process of providing credit data works

Suppliers play a vital role in the US credit system by sharing consumer data. But what kinds of information do credit grantors provide to bureaus? Everything you find in a credit report.

Providers share account information, including credit inquiries and total 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 it with credit bureaus, and your scores would 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 may also show other aspects of your financial history, including bankruptcies, debt recoveries from write-offs, foreclosures, and vehicle seizures. For example, suppose you have an outstanding balance on your credit card and you stop making payments. Eventually, the issuer will cancel your debt – meaning they don’t expect you to pay it – and sell it to a collection agency. In turn, the collection agency takes over your debt and may continue to provide information about your delinquent account to one or more credit reporting bureaus.

Regulation of credit data providers

Although lenders and other institutions are not legally required to provide credit information, when they choose to do so, they must follow the regulations set forth in the Fair Credit Reporting Act (FCRA).

Broadly speaking, there are two general rules that a credit data provider must follow under the FCRA:

  1. The information must be accurate and complete.
  2. Consumers must be able to dispute the information and, if they do, the supplier must be able to fully investigate the dispute.

Accordingly, providers must have strict internal policies and controls to ensure accuracy and enable consumers to challenge their data. For example, if you were to dispute an inaccurate balance on your report, the provider is legally obligated to investigate your complaint.

So, if furnishing is not necessary, why do institutions do it?

“Furniture is good for everyone, both in terms of credit risk and cost of credit,” says Widhalm. “The more information available, the more accurately a lender can assess risk – so lenders should have fewer losses and consumers with

good credit

should get lower rates.”

Furnishings also encourage responsible financial behavior. Borrowers who consistently make on-time payments are rewarded for their efforts – their credit reports are updated to show good habits, which should improve their credit scores. Conversely, borrowers who miss payments will hurt their scores, making it harder to access credit in the future.

How to make sure your credit data is accurate

We may live in an automated, digital-centric world, but that doesn’t mean credit scoring is a perfect system. Mistakes are actually quite common.

“Thirty-four percent of consumers in the United States have an error or inaccuracy on their credit report, ranging from their misspelled name to an entire business line that is not theirs,” Widhalm says. “Your report might have two mortgages but you really only have one. At best, it’s 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. It may seem like an unnecessary chore, but it’s wise to regularly monitor what’s shared with desktops. If you find an error, you can dispute it and potentially improve your credit score.

Since lenders aren’t required to provide, you may even find that your good borrowing habits don’t register at all. If so, your only option is to switch to a lender that provides data to bureaus.


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