Every month you diligently pay your creditors, but when you check your credit score, you notice that your credit report remains unchanged.
After enquiring about this, you find out that your creditor doesn’t report your good credit behaviour to the bureaus. We find out what you can do to change their minds and help you build your credit score.
Tip: If you’re struggling to meet your monthly payments, consider debt counselling today.
Why creditors report your credit history
Why creditors report your credit history
As noted by Lebo Nong, co-founder at Nong Wealth, a credit report summarizes a debtor's behavioural patterns when it comes to settling debt.
Creditors are able to make a calculated decision about lending to individuals based on affordability, and the client’s credit and payment history. Bureaus will then assess the borrower’s financial behaviour by weighing the information creditors provide.
“Credit bureaus depend on lenders to provide them with information on a monthly basis, in order to update individuals’ credit history,” Lebo says. “They play an important role in providing essential transactional information about debtors to the bureaus.”
This credit history is accessed by creditors when deciding whether they should offer a client credit. It also forms the basis of a client’s credit score.
“Maintaining a good credit score gives the debtor bargaining power, such as negotiating lower interest rates, getting higher credit limits, and standing a better chance of securing a loan,” says Lebo.
Are creditors required to report credit history?
Neo Nong, co-founder of Nong Wealth, says that creditors are not bound by law to give this information to the credit bureaus. Doing so is a choice and it depends on each creditor’s preference.
He explains that creditors incur costs in submitting this information. Therefore, some creditors only use a single credit bureau to cut costs.
“Some lenders only submit information on a quarterly basis. Hence, one may find inconsistencies throughout the various credit bureaus,” says Neo.
Some creditors choose to report all credit behaviour, while others prefer to only report larger events, such as account closures or defaults. Unfortunately, positive credit behaviour isn’t always considered a large event, as it doesn’t cause any concern.
For this reason, your positive credit history may remain unreported by your creditors. So, what can you do to change their minds?
The following arguments may prove useful and are certainly worth a try.
- If a creditor is renowned for reporting positive credit behaviour, it would encourage lenders to take out credit from them rather than from their peers. Besides being able to offer a loan, they will also be able to offer their clients an opportunity to improve their credit score. This offers them the advantage of a preferable reputation as a good creditor.
- By rewarding their client’s good credit behaviour, creditors are encouraging them to continue paying their accounts on time. Many studies have shown that positive reinforcement is effective in enacting change, and reinforcing positive behaviour.
- When creditors assess whether a new client has a positive credit history, they rely on what other creditors have reported. If all creditors sat back and decided that this responsibility lay with their competitors, it would be difficult to discern a client’s true credit history. This is a typical example of the “free-rider” problem, where a group benefits from a resource without contributing to its upkeep. Creditors have the opportunity to be an industry leader in this regard.
By approaching your creditor and explaining to them why it may be beneficial to report your good credit behaviour, you may set a new policy in motion which could improve many clients’ scores.
The larger creditors already report most information to the bureaus, so this will be more applicable to smaller creditors. Find out who’s in charge, and don’t hesitate to contact their senior executive directly.
Before you get started with this, check which of your creditors do, in fact, report your credit history.