Lenders aren’t legally bound to share your data with the credit bureaus. Here’s what to know about the rules

Originally published in Business Insider on June 22nd, 2022

Written by: Carter Kilmann

  • Data furnishing is the process of sharing consumer information with the major credit bureaus.
  • Since data furnishing isn’t required, your credit reports may not reflect all your borrowing activity.
  • Credit reporting errors are common, so it’s wise to check your reports regularly.

Credit reports play a huge role in the lives of US consumers. Lenders and other creditors use the information in them to assesses your credit history and determine if you’re capable of managing debt. The data is also used to calculate your credit score, which has an impact on everything from the interest rate you pay on your mortgage to the cost of your auto insurance.

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

Read on to find out how your credit reports and scores come to be — and what you should be aware of as a borrower.

How credit reporting 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 10 years. Much like a school transcript illustrates how well you performed academically, 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 firms individually house hundreds of millions of consumer credit reports. But how do they get data on so many consumers? From the financial institutions people bank with and borrow from.

For example, let’s assume you open a credit card account with a major financial institution. You use your card for purchases, make timely payments, and pay off your previous statement balance each month. Once your lender shares, or “furnishes,” your data to the credit bureaus — which is usually every 30 to 45 days — your credit reports will update 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 a borrower’s likelihood of default in the next 24 months. As people borrow and repay debt (or don’t), they create a feedback loop of credit data that lenders use to evaluate applications and issue new loans.

What is a credit data furnisher? 

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

Furnishers can include traditional banks, digital banks, credit unions, credit card issuers, collection agencies, mortgage lenders, and auto loan lenders. If a company is involved in financing, it probably furnishes credit data. However, just because an institution furnishes credit data doesn’t mean it furnishes it to all three bureaus.

“Lenders are not required to furnish consumer credit data,” according to Christian Widhalm, chief executive officer of Bloom Credit, an API platform that enables businesses to integrate with credit bureaus. “But if they do, there’s a registration and setup process for each credit bureau, which takes both time and money, causing some lenders to furnish data to only a single 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 won’t register your credit activity.

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

How the credit data furnishment process works 

Furnishers play an integral role in the US credit system by sharing consumer data. But what kinds of information do credit furnishers provide to the bureaus? Everything you’d find in a credit report.

Furnishers share account information including credit inquiries and total credit availability, which are key components of your credit score. They also provide account activity like outstanding balances and payment history. For instance, if you miss payments, lenders can share this with the credit bureaus, and your scores would likely take a hit. They also share your name, address, social security number, and other personal information so your activity can be connected to your identity.

Your credit reports can also display other aspects of your financial history, including bankruptcies, debt collections from charge-offs, foreclosures, and vehicle repossessions. For example, let’s assume you have an outstanding credit card balance and you stop making payments. Eventually, the issuer will write off 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 furnishing your delinquent account information to one or more credit reporting bureaus.

Quick tip: You’re legally entitled to a free credit report from each of the major bureaus once every 12 months. Visit annualcreditreport.com to request your free reports. You can also access your reports by creating a free account with each bureau.

Credit data furnisher regulations

While lenders and other institutions are not legally required to furnish credit data, when they choose to do so they have to follow regulations established in the Fair Credit Reporting Act (FCRA).

Generally speaking, there are two overarching rules that a credit data furnisher must abide by under the FCRA:

  1. Information must be accurate and complete.
  2. Consumers must be able to dispute the information — and, if they do, the furnisher must be able to thoroughly investigate the dispute.

As a result, furnishers must have strict internal policies and controls to ensure accuracy and enable consumers to dispute their data. For example, if you were to dispute a misstated balance on your report, the furnisher is legally obligated to investigate your claim.

So, if furnishing isn’t required, why do institutions do it?

“Furnishing is good for everyone, in terms of both credit risk and the cost of credit,” says Widhalm. “The more information that’s out there, the more accurately a lender can price risk — so lenders should have fewer losses and consumers with good credit should get lower rates.”

Furnishment also encourages responsible financial behavior. Borrowers who routinely make payments on time are rewarded for their efforts — their credit reports update to show their good habits, which should improve their credit scores. Conversely, borrowers who miss payments will hurt their scores, making it more difficult to access credit in the future.

How to ensure your credit data is accurate

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

“Thirty-four percent of consumers in the US have an error or inaccuracy on their credit report, ranging from their name being misspelled to having an entire trade line that’s not theirs,” says Widhalm. “Your report could 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 your credit data is accurate. This may seem like an unnecessary chore, but it’s wise to regularly monitor what’s shared with the bureaus. If you find a mistake, you can dispute it and potentially improve your credit score.

Since lenders aren’t required to furnish, you may even find that your good borrowing habits aren’t registering at all. If that’s the case, your only option is to switch to a lender that does furnish data to the bureaus.

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