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The credit reporting system comprises of institutions, procedures, individuals, rules and techniques that can facilitate the flow of information relevant to credit agreement decision making. Developing an effective credit reporting system is a lengthy process that requires sustained commitment from all stakeholders.
For the entire process of setting up such a system from the stage of discussion to public education and work on the legal and regulatory framework to actuarial system implementation, that includes uploading data and issuing the first credit report, it may take three to five years to get ready.
Furnishers play an important role in the credit reporting system. These participants have defined roles and obligations as determined by the FCRA. These are creditors who use credit reports and the public records related to the bankruptcy filing, tax liens and judgements also serve as a source of information for the NCRAs.
Each NCRA has a consumer database with over 1.3 bn active trade lines where the financial institution furnishes the bulk of the trade lines.
The furnishers have multiple incentives to contribute data to the NCRAs. Individual contributors recognize that the cross-company, cross-industry visibility into credit risk offered by credit bureau depends on widespread creditor participation.
For each tradeline, creditors that furnish information to consumer reporting agencies are referred to as furnishers under the FCRA who provide the type of credit like the auto loan, credit card, mortgage, the credit limit or the loan amount, the account payment history (the timelines of payments, whether or not the account is delinquent or in the collection and the dates the account was opened and closed).
If there are more than one consumer or borrower on a credit account, the information is provided related to the relationship of the consumer on the account and the authorized user.
The US credit reporting system includes a cash flow of information where they get information from more than 10K furnishers. The furnishers provide information on over 1.3bn consumer credit accounts or the trade lines monthly. They provide consumer credit information electronically to one or more NCRs using a standardized format.
Inaccuracies can happen in the consumer provide inaccurate data at the time when they apply for a loan or if the creditor who furnishes data to the credit bureau inserts consumer information to the system inaccurately.
One can feed inaccurate consumer information into the system or there can be typographical mistakes like transposing two digitals in the Social Security Number, transposing first and middle names and misspelling names or others.
Annual credit report UK furnishes information to maintain an incentive for their borrowers to make timely repayments and they are benefited from timely payment reported as it improves their creditworthiness.
Tradeline information contains indicators like
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