Is Credit Reporting Voluntary?

The information that shows up on your credit reports can certainly have a significant influence on your life, but you might wonder how and why the information gets added to your credit reports in the first place. Are lenders and others legally required to report your account history and other information to the credit reporting agencies (CRAs)? Are the CRAs required to add the information to your credit reports? Maybe…maybe not.

Reporting Is a Choice, Not an Obligation

Credit reporting is a choice. There are certainly laws and policies which dictate which kinds of information may be added to your credit reports and for how long the information can remain. However, these laws and policies serve to regulate information which is voluntarily provided to the CRAs and which the CRAs voluntarily choose to include on your credit reports.

There is no federal or state law which requires any lender or creditor to furnish information to the CRAs. Furthermore, there is no law which requires the CRAs to accept data from any lender or creditor. The nature of credit reporting is completely voluntary. You simply don’t have a right to a credit report, and you don’t have the right to NOT have a credit report.

The Data Furnishers

Although there is no legal requirement for a lender or anyone else to provide the CRAs with information, many companies have and will continue to choose to do so. The companies that supply the CRAs with information are referred to as “data furnishers” and include lenders, credit card issuers, other types of creditors, and collection agencies.

It is also worth noting that, not only do data furnishers voluntarily supply the CRAs with information to be included in consumer credit reports, they do so for free. The CRAs do not pay data furnishers for your information.

Then What’s In It for the Data Furnisher?

It is easy to understand why the CRAs accept information from data furnishers to be included in your credit reports. Your credit information is valuable and reselling that information to others is one of the primary ways the CRAs make money. The CRAs collect the information they receive about you and some 220 million other consumers then repackage and resell that information to lenders, insurance companies, employers, and other businesses that are willing to purchase the data.

Data furnishers, on the other hand, may supply the CRAs with information for a variety of reasons. Most lenders and credit card issuers, for example, choose to share certain information with the CRAs because credit reports are heavily relied upon to help them evaluate the risk of doing business with new applicants or existing customers. Such entities can benefit greatly from more complete and accurate credit reporting.

Credit reporting can also serve as motivation to compel you to pay your debts. Collection agencies represent another type of data furnisher that will often voluntarily supply the CRAs with information. Collection agencies know that submitting negative information to be included on your credit reports can often be an effective tool which they can use to collect on more defaulted debts. It’s the “stick” in the carrot and the stick equation.

Not Everyone Reports

Although there are many companies that do voluntarily choose to report information to the CRAs, there are other industries that do not. Of course there can always be exceptions to the rule, but some of the industries that typically avoid reporting to the Big 3 CRAs include:

• Utility Companies
• Medical Providers
• Insurance Providers
• Landlords and Apartment Complexes

If a company with whom you do business does not report information to the CRAs then, even if you were to ask, there is no way for you to force such accounts to be included on your credit reports.