Consumers have a habit of saying how hard it is to have debt, or how emotionally taxing. They may not always be aware of how much stress their debt causes to the people who lent them the money. Debt is inherently risky, and so financial institutions assign importance to the examination of applications for credit, and on their acceptance or rejection of those applications. Their task is aided by organizations who provide credit data solutions.
The examination always entails scrutinizing the past debt of the company or person submitting the application. Financiers want to have information on what other debts the applicant has, or has had, what amounts are or were involved and why the lending was necessary. They also want to be satisfied as to the applicant's payment profile. Are there bad debts? Is there anyone who wasn't paid? These enquiries have to be resolved, regardless of whether the other party describes them as undesirable.
The other side of the assessment is based on the verification procedure. Financial institutions need to confirm that people are who they say they are, work where they say they work and earn the stated income. This is not only about the applicant's ability to repay the debt but is also done for obvious security purposes.
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.
First, there is the matter of quality. Is the data provided accurate? How much of it is there? A report should not include false information. All dates and amounts should be correct. The bureau should also be able to tell their customers how they acquired the information. Any error can have a negative impact not only on the lender's assessment but also on the consumer, who may then be unable to access lending facilities.
This is associated with the second issue: integrity. What security measures does the data supplier use? How hard is it for consumers to adapt or destroy their details? Data providers should have a considerable reputation in the industry. They should not easily release reports or allow alterations to their records.
Third, how representative is the database? What share of the market does the data supplier cover? If a supplier does not have a large enough database, it cannot satisfy the enquiries of its clients on a regular basis.
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.
The examination always entails scrutinizing the past debt of the company or person submitting the application. Financiers want to have information on what other debts the applicant has, or has had, what amounts are or were involved and why the lending was necessary. They also want to be satisfied as to the applicant's payment profile. Are there bad debts? Is there anyone who wasn't paid? These enquiries have to be resolved, regardless of whether the other party describes them as undesirable.
The other side of the assessment is based on the verification procedure. Financial institutions need to confirm that people are who they say they are, work where they say they work and earn the stated income. This is not only about the applicant's ability to repay the debt but is also done for obvious security purposes.
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.
First, there is the matter of quality. Is the data provided accurate? How much of it is there? A report should not include false information. All dates and amounts should be correct. The bureau should also be able to tell their customers how they acquired the information. Any error can have a negative impact not only on the lender's assessment but also on the consumer, who may then be unable to access lending facilities.
This is associated with the second issue: integrity. What security measures does the data supplier use? How hard is it for consumers to adapt or destroy their details? Data providers should have a considerable reputation in the industry. They should not easily release reports or allow alterations to their records.
Third, how representative is the database? What share of the market does the data supplier cover? If a supplier does not have a large enough database, it cannot satisfy the enquiries of its clients on a regular basis.
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.
No comments:
Post a Comment