How To Select A Credit Data Solutions Provider -


How To Select A Credit Data Solutions Provider

By Miranda Sweeney

People may assume that having debt is sometimes stressful, but so is lending money to other people. Any loan involves some measure of risk to both parties, and that is why credit providers put so much emphasis on the assessment of those who apply to them, and also on the decision to approve or reject an application. The task of lenders is made easier by the use of credit data solutions.

Lenders are always interested in the financial history of the individual or company who applies to them. They need to determine how much debt the applicant already has, who issued it and for what reason. They also need to be sure that the applicant is a reliable payer. Do they have unpaid accounts? Have they had debt written off in the past? These are typical questions for finance houses to ask, even if they are described as offensive or unnecessary by the applicant.

The assessment also entails confirming the applicant's information. Financiers should always make sure that the information as to identity, employment and income is accurate. This is about more than creditworthiness. It is also about self-explanatory security issues.

All of this information about applicants (consumers) is called credit data. Because it is so personal in nature, relating to financial activities and personal identity, it is usually protected by law and hard to access. On the other hand, consumers sometimes try to prevent financial institutions from obtaining it. Lenders therefore need to have a trustworthy source of such information.

There are paid services who store and provide it. These organizations, known as credit bureaus, have the legal authority and the infrastructure to maintain databases of consumers and their industry histories. Lenders are allowed to request records if the applicant signs over permission to do so. That permission is contained in the small print of any finance application.

Selecting a data provider should be based on some important characteristics.

Firstly, the quality of the data. How extensive is it? Is it reliable? Bureau reports should give accurate dates and figures and also be prepared to inform their customers as to the sources of their information. There should not be errors as this can prejudice not only the lender's decision but also the consumer's ability to be approved for finance.

In connection with quality, one also has to mention integrity. How strong is the supplier's security system? How easily can a consumer change or delete their record? A data provider should be respected in the industry. They should not permit easy access to their database.

Lastly, how many people are recorded in the database? What proportion of the market does the supplier represent? If the proportion is too low, the latter won't always be able to answer their customers' enquiries.

The bureaus are sometimes criticized by consumers as obstructing successful credit applications. However, the bureaus are important in that they help to reduce bad debt and in doing so protect the viability of the industry.

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