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Definition, Rules, Impact on Credit Report


  • 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…

Read More: Definition, Rules, Impact on Credit Report

2022-06-22 19:37:48

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