People often mention the stress associated with having significant debt, but they may not realise that it is sometimes equally stressful to be on the other side of the transaction. By its nature, debt incorporates risk, and so lenders place their emphasis on evaluating those who apply for finance, as well as on how they decide whether or not to grant it. This process is assisted by relying on 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.
Assessment of the application is also concerned with the veracity of the applicant's other information. The accuracy of personal details such as employment, identification and salary has to be ascertained. Issues of security necessitate this process, besides the assessment itself.
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 organizations who retain and supply this data, on a paid basis. They are commonly known as credit bureaus and they are legally authorized to do so. They maintain databases of consumers and their histories in the industry. Lenders are permitted to purchase access to the data if applicants sign over that option to them. That is why such permission is requested on any application for a loan or other finance.
In choosing a data provider, lenders need to take certain factors into consideration.
To start with, what is the quality of the information provided? How reliable is it? How much information is given? A consumer's report should contain only correct dates and numbers. The bureau must also be forthcoming about where they obtained their records. Errors are serious because it is not only the lender who is disadvantaged by them; the consumer also suffers because their applications are turned down.
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.
Also, what is the market representation of the database? How many consumers does the bureau have information on? If the database is too small the bureau will not be able to assist financiers in assessing all of their applications.
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.
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.
Assessment of the application is also concerned with the veracity of the applicant's other information. The accuracy of personal details such as employment, identification and salary has to be ascertained. Issues of security necessitate this process, besides the assessment itself.
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 organizations who retain and supply this data, on a paid basis. They are commonly known as credit bureaus and they are legally authorized to do so. They maintain databases of consumers and their histories in the industry. Lenders are permitted to purchase access to the data if applicants sign over that option to them. That is why such permission is requested on any application for a loan or other finance.
In choosing a data provider, lenders need to take certain factors into consideration.
To start with, what is the quality of the information provided? How reliable is it? How much information is given? A consumer's report should contain only correct dates and numbers. The bureau must also be forthcoming about where they obtained their records. Errors are serious because it is not only the lender who is disadvantaged by them; the consumer also suffers because their applications are turned down.
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.
Also, what is the market representation of the database? How many consumers does the bureau have information on? If the database is too small the bureau will not be able to assist financiers in assessing all of their applications.
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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