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
According to Lebo Nong, co-founder at Nong Wealth, a credit report summarizes the 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, the client’s credit history, and their payment history. Bureaus will then assess the borrower’s financial behaviour by weighing the information provided by creditors about their payment habits.
“Credit bureaus depend on lenders to provide them with this information on a monthly basis in order to update individuals’ credit history. They play an important role in providing essential transactional information about debtors to the bureaus,” says Lebo.
This credit history is then accessed by new creditors in deciding whether they should offer a new client credit or not.
Lebo warns that having a negative credit score can last for seven years on the credit bureaus’ data base. Hence, it is important to keep up a positive credit score.
“Maintaining a good credit score gives the debtor bargaining power, such as in negotiating lower interest rates, getting higher credit limits, and standing a better chance of securing a loan,” says Lebo.
Are creditors forced 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 further 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 defaulting. Unfortunately, positive credit behaviour isn’t always considered a large event, 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, or even just reinforcing positive behaviour.
- When creditors assess whether a new client has a positive credit history, they rely on what other creditors have reported so far. 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 start reporting your good credit behaviour, you may set a new policy in motion which can improve many clients’ scores.
The larger creditors already report most information to the bureaus, so this will be most 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.