Some product and fuctions of credit reporting.
Date: Mon, 04/25/2005 - 17:23
Some product and functions off credit reporting
Just like to explain a bit more about the credit reporting side, how things work between creditors and the credit reporting agencies.
There are of course the 3 major credit reporting agencies, and then there are the credit bureaus. Credit Bureaus usually resell credit reports to creditors from the credit reporting agencies. There may be some that collect and sell to the lenders their own data, I know it is likely a combination, that they purchase from the credit reporting agency and may in the course of their business alter the original information for resell to creditors.
Credit Bureau in some cases resells credit reports to consumers, but for the most part their job is to set up businesses like dealerships and banks even landlords that have permissible purpose to pull consumer credit reports. There are add-on services that go with the credit reports, and then there is setting up creditors to report financial data on consumers.
Credit Scoring which differs depending what industry is using the credit score (auto, personal finance, credit card, credit union, banks...) important to understand that the score which lenders purchase are not the same as what the Credit Reporting Agencies sell to consumers. Example is say you go to an auto dealer and they pull a credit score. What it does is compare your credit against other consumers that have already had auto loans; it is looking at the other's credit trends past, present and future. Then it will grade your credit compared to these and produce a score tailored just for the auto industry.
Profile Summary (each CRA has a different name for similar products sold) anyway profile summary - this adds up all the different tradelines (accounts) by type, what the balances are, what is outstanding and sums up the over all utilization. Lenders use this to assist with underwriting and speeding up the approval process. I know some of the Credit Reporting Agencies sell credit reports now that give a similar break down for consumers. Pretty nifty for really seeing what your over all debt is and may in some cases be a wake up call to those not paying much attention to budgeting.
Demographics, which may include phone numbers, listing if you are a homeowner, geo code, driver's license, and so forth. collection agencies and Creditors would be ideal for this add on service to locate and determine what efforts are taken when trying to collect a debt.
Skip Locator, this is an interesting service used by both collection agencies and creditors when people skip out on debt. What they do is update the credit reporting agency to report SCNL (subscriber cannot locate) to show on the credit report. Skip Locator will prompt the credit reporting agency to notify them when the credit report is pulled so they can pull a report to see if any new addresses have been added to indicate where the debtor has move off to. SCNL is also used in hopes that another creditor pulling a report would see this and contact them disclosing the consumer's new location.
Then there is a combination of services combined to make new services like opt-in (mailing lists) purchased for solicitation purposes:
Example: say that a bank wants to extend a home equity loan to homeowners, but they need a mailing list first. So they ask the credit reporting agency to sell them a mailing list of all homeowners within given zip codes near them and say they want only the ones with 650 credit scores or better. So then they can send out their solicitations to the various consumers in that area. Does not mean that you are approved, just that you had been picked out selectively by the credit reporting agency for this promotion. The creditor will still need to pull a credit report only after you have completed an application. They can still decline you, for further example say that you had a bankruptcy and that was to them an instant decline even though your score was above 650. So this is how certain products work in combination.
Other products again using Experian, as an example is social search, using just the social security number of a consumer the name and addresses belonging to that person can be verified. I like this service myself, because it cuts down on fraudulent accounts being opened should more creditors extend the extra cost to just check this first. Good example is say a person comes in gives a fake name and fake social security number, then the CRA was not able to pull a credit report since all the info was incorrect, well pulling social search you would find out quickly that the number actually belonged not to a guy but a lady that has never lived within the state which you are in. So the person applying for the credit gets turned down. Unfortunately at this time, there is nothing in place for the creditor to report up to law enforcement and notify the consumer. But this system has every capability to be put to good use for the consumers and I hope that further use can be made of this service.
That is just an idea on what goes on between creditor and credit reporting agency, then there is the reporting aspect.
Each creditor works differently, large creditors like credit card companies will most likely report every month, smaller creditors like a credit union might wait to send in their information every three months. Then there are the collection agencies that a good many will just report one time and not update again until the account is paid in full. What they send in is called tapes, but that is just a general name for various methods like microfiche, spreadsheets and such. There are different formats that the data must be in for the credit reporting agency to accept a tape.
It is these format rules that can cause reporting problems. Not all creditors do their own reporting; either they will have a reporting department, or a processor outside that they use to forward the data to the credit reporting agencies. There are so many fields and types of data that is required that mistakes can be made. What is even worse is trying to fix these mistakes because if a processor is involved the creditor is not all the time aware of what is required to fix the mistake.
[list=1]
Creditors can update a credit reporting agency of changes by using a Universal Data Form, a worksheet that can note the consumer's information and the correct account information. This service is starting to be faded out by some of the credit reporting agencies.
E-Port is an electronic version to the Universal data form which Equifax uses.
Bulls eye Report also is an electronic version to the Universal data form used by Experian.
All three of the above mentioned will submit new data to be updated with in 3 to 5 days. Also all three of the above mentioned require that the reporting department or processor update the tapes - otherwise the next months tapes will just revert the changes made by the manual update. The only time that updating tapes won't matter is if the account was closed and already missing from the tape system. The manual updates are just a one-time update so it is not recommended on the open accounts unless time is of the essence for major time pending loans like mortgage.
Know that consumers see mistakes and are quick to jump the gun calling in mad about it, but in the creditors defense they are blind to these mistakes until consumers brings it to their attention. They have no reason or permissible purpose to be pulling the credit reports to see what happened, nor do they have the time to be checking every credit report that they update.
Recommend that when you find problems, to first give the creditor the benefit of the doubt, to call them and ask to speak with their reporting department and let them know what exactly is showing on the credit report - they may even ask for your assistance to forward a copy of the credit report to review for themselves if they are not able to ascertain directly from you the needed information to indicate to them where the reporting problem is. You may remove all other information in the report that does not pertain to them, they just need to see the tradeline exactly as the reporting agency is showing it on the credit report.
Some cases, like if the creditor no longer has the account in their tape system, you may need for the creditor to just forward you a confirmation letter on their own letterhead signed that you can forward a copy of to the Credit Reporting Agency to correct the credit reporting of said account. This is not uncommon, after accounts are closed, transferred, or sold the creditor no longer has a reason to keep these on tape. So they prune out the outdated accounts on a regular basis and don't have the means to always update a credit reporting agency.
Sometimes other reasons may arise, like say the creditor went out of business, or say that they just discontinued reporting to a particular credit reporting agency. It happens all the time that they switch among the reporting agencies. Not all creditors actively report to all three credit reporting agencies because the cost might be to great, smaller businesses are faced with this problem all the time.
I know of some great creditors, some that would bend over backwards to help their customers, and just like to pass along this information so that education might make all the difference and help people out there realize what can be done and what some of the limitations are.
Also if you think about it, there are so many employees in key positions that change on a regular basis, upkeep of educating and insuring that these new positions filled are ready is not an easy task. So try to put out the information any way possible to explain to both sides what just some aspects are about.
Just like to explain a bit more about the credit reporting side, how things work between creditors and the credit reporting agencies.
There are of course the 3 major credit reporting agencies, and then there are the credit bureaus. Credit Bureaus usually resell credit reports to creditors from the credit reporting agencies. There may be some that collect and sell to the lenders their own data, I know it is likely a combination, that they purchase from the credit reporting agency and may in the course of their business alter the original information for resell to creditors.
Credit Bureau in some cases resells credit reports to consumers, but for the most part their job is to set up businesses like dealerships and banks even landlords that have permissible purpose to pull consumer credit reports. There are add-on services that go with the credit reports, and then there is setting up creditors to report financial data on consumers.
Credit Scoring which differs depending what industry is using the credit score (auto, personal finance, credit card, credit union, banks...) important to understand that the score which lenders purchase are not the same as what the Credit Reporting Agencies sell to consumers. Example is say you go to an auto dealer and they pull a credit score. What it does is compare your credit against other consumers that have already had auto loans; it is looking at the other's credit trends past, present and future. Then it will grade your credit compared to these and produce a score tailored just for the auto industry.
Profile Summary (each CRA has a different name for similar products sold) anyway profile summary - this adds up all the different tradelines (accounts) by type, what the balances are, what is outstanding and sums up the over all utilization. Lenders use this to assist with underwriting and speeding up the approval process. I know some of the Credit Reporting Agencies sell credit reports now that give a similar break down for consumers. Pretty nifty for really seeing what your over all debt is and may in some cases be a wake up call to those not paying much attention to budgeting.
Demographics, which may include phone numbers, listing if you are a homeowner, geo code, driver's license, and so forth. collection agencies and Creditors would be ideal for this add on service to locate and determine what efforts are taken when trying to collect a debt.
Skip Locator, this is an interesting service used by both collection agencies and creditors when people skip out on debt. What they do is update the credit reporting agency to report SCNL (subscriber cannot locate) to show on the credit report. Skip Locator will prompt the credit reporting agency to notify them when the credit report is pulled so they can pull a report to see if any new addresses have been added to indicate where the debtor has move off to. SCNL is also used in hopes that another creditor pulling a report would see this and contact them disclosing the consumer's new location.
Then there is a combination of services combined to make new services like opt-in (mailing lists) purchased for solicitation purposes:
Example: say that a bank wants to extend a home equity loan to homeowners, but they need a mailing list first. So they ask the credit reporting agency to sell them a mailing list of all homeowners within given zip codes near them and say they want only the ones with 650 credit scores or better. So then they can send out their solicitations to the various consumers in that area. Does not mean that you are approved, just that you had been picked out selectively by the credit reporting agency for this promotion. The creditor will still need to pull a credit report only after you have completed an application. They can still decline you, for further example say that you had a bankruptcy and that was to them an instant decline even though your score was above 650. So this is how certain products work in combination.
Other products again using Experian, as an example is social search, using just the social security number of a consumer the name and addresses belonging to that person can be verified. I like this service myself, because it cuts down on fraudulent accounts being opened should more creditors extend the extra cost to just check this first. Good example is say a person comes in gives a fake name and fake social security number, then the CRA was not able to pull a credit report since all the info was incorrect, well pulling social search you would find out quickly that the number actually belonged not to a guy but a lady that has never lived within the state which you are in. So the person applying for the credit gets turned down. Unfortunately at this time, there is nothing in place for the creditor to report up to law enforcement and notify the consumer. But this system has every capability to be put to good use for the consumers and I hope that further use can be made of this service.
That is just an idea on what goes on between creditor and credit reporting agency, then there is the reporting aspect.
Each creditor works differently, large creditors like credit card companies will most likely report every month, smaller creditors like a credit union might wait to send in their information every three months. Then there are the collection agencies that a good many will just report one time and not update again until the account is paid in full. What they send in is called tapes, but that is just a general name for various methods like microfiche, spreadsheets and such. There are different formats that the data must be in for the credit reporting agency to accept a tape.
It is these format rules that can cause reporting problems. Not all creditors do their own reporting; either they will have a reporting department, or a processor outside that they use to forward the data to the credit reporting agencies. There are so many fields and types of data that is required that mistakes can be made. What is even worse is trying to fix these mistakes because if a processor is involved the creditor is not all the time aware of what is required to fix the mistake.
[list=1]
All three of the above mentioned will submit new data to be updated with in 3 to 5 days. Also all three of the above mentioned require that the reporting department or processor update the tapes - otherwise the next months tapes will just revert the changes made by the manual update. The only time that updating tapes won't matter is if the account was closed and already missing from the tape system. The manual updates are just a one-time update so it is not recommended on the open accounts unless time is of the essence for major time pending loans like mortgage.
Know that consumers see mistakes and are quick to jump the gun calling in mad about it, but in the creditors defense they are blind to these mistakes until consumers brings it to their attention. They have no reason or permissible purpose to be pulling the credit reports to see what happened, nor do they have the time to be checking every credit report that they update.
Recommend that when you find problems, to first give the creditor the benefit of the doubt, to call them and ask to speak with their reporting department and let them know what exactly is showing on the credit report - they may even ask for your assistance to forward a copy of the credit report to review for themselves if they are not able to ascertain directly from you the needed information to indicate to them where the reporting problem is. You may remove all other information in the report that does not pertain to them, they just need to see the tradeline exactly as the reporting agency is showing it on the credit report.
Some cases, like if the creditor no longer has the account in their tape system, you may need for the creditor to just forward you a confirmation letter on their own letterhead signed that you can forward a copy of to the Credit Reporting Agency to correct the credit reporting of said account. This is not uncommon, after accounts are closed, transferred, or sold the creditor no longer has a reason to keep these on tape. So they prune out the outdated accounts on a regular basis and don't have the means to always update a credit reporting agency.
Sometimes other reasons may arise, like say the creditor went out of business, or say that they just discontinued reporting to a particular credit reporting agency. It happens all the time that they switch among the reporting agencies. Not all creditors actively report to all three credit reporting agencies because the cost might be to great, smaller businesses are faced with this problem all the time.
I know of some great creditors, some that would bend over backwards to help their customers, and just like to pass along this information so that education might make all the difference and help people out there realize what can be done and what some of the limitations are.
Also if you think about it, there are so many employees in key positions that change on a regular basis, upkeep of educating and insuring that these new positions filled are ready is not an easy task. So try to put out the information any way possible to explain to both sides what just some aspects are about.
Hi, Nice article on credit reporting.Explains a lot of things w
Hi,
Nice article on credit reporting.Explains a lot of things which are not available very easily.
thanks for this post.
Mike
