Credit reporting is the foundation of the modern financial infrastructure. Since a consumer’s past behavior is the most telling sign of how they will repay debts in the future, credit reports with detailed histories provide other lenders with vital lending information.
The three major bureaus, Equifax, Experian, and TransUnion collect information about a consumers credit, leasing, non-credit related bills, money-related public records, and inquiries to create a credit report. A credit report generally contains identifying consumer information, detailed information from creditors, information from money-related public records (e.g., bankruptcies, judgements, tax liens, etc.), information from collection agencies, and companies that have inquired a consumer’s credit record.
Lenders use credit reports to help determine the lending rates they can extend to borrowers and to determine a consumer’s ability to repay debts. With consumers having more visibility and being more mindful as to what is on their credit report, it is imperative that lenders extend this service to their customers.
Here are three reasons why you should be reporting credit to one or more of the three major credit bureaus:
1. Helps inform future lenders.
Credit reporting increases transparency and introduces discipline into credit markets. When credit data is made available to more potential lenders, a consumer’s credit report helps to clarify the risk surrounding each new loan application. The more information about a consumer’s past credit history or how they handle existing accounts improves a lender’s risk assessment.
2. Enhances your competitive edge.
Reporting payment histories helps consumers that are working to increase their score or repair their past history. For consumers that are working to rebuild their creditworthiness, they will look to lenders that report credit to one of more of the major credit bureaus.
3. Helps consumers.
One of the biggest driving factors in a consumer’s credit score is their payment history. Dealers and lenders can utilize payment reminders via email or text to ensure customers are paying their loans on time. Dealers and lenders can also offer automatic payments by check or debit/credit card to help their customers build their credit history. By reporting credit and payment histories, you help lower your customer’s future credit risk to future potential lenders. This in turn helps the customer save money in interest and/or finance charges in the future.
Having a dealer management software, like Deal Pack, with the capability of creating the files needed to submit to the credit bureaus, sending payment reminders via email or text, and having the ability to setup automatic payments is paramount in helping current and future customers in building (or rebuilding) their credit.
For more information on how Deal Pack can help your competitive edge and to better serve your customers, contact email@example.com or call 1-800-526-5832.