The importance of data contribution is often misunderstood or undervalued in the commercial credit sector, which may deter individuals from exploring this concept further. Data contribution — especially combined with proper portfolio management — is crucial to getting the most out of the commercial credit experience, for credit professionals and clients alike.
What is data contribution?
Data contribution — or data reporting — is the process of sharing your accounts receivable data with a credit reporting service, such as Experian or Equifax. The data can then be accessed by not only the designated reporting agency, but also individuals who use the service.
Many credit professionals are disinclined to report this data because they are hesitant to give information to potential competitors. But not contributing data is a surprisingly risky decision, and the benefits are too great to ignore.
Why is data contribution a good idea?
Data drives effective decision making, helps keep things running smoothly, and is vital to positive interactions with clients. Those who contribute data gain assistance in sorting and managing that information. When you’re managing thousands of active accounts, having support to dissect and disseminate that data is invaluable.
When you contribute data to a commercial credit reporting agency, you gain access to powerful data analysis tools that simplify the data management process. Data is accessible and organized, benefitting everyone. Some services, such as Experian and Equifax, offer alerts for account changes. If there is a problem with an account, you’re informed immediately. These alerts prevent account problems from sitting unnoticed until they become serious.
Other benefits of data contribution include:
- Reduced potential for overextending credit
- Increased visibility to reward good-paying customers and enable them to improve their credit scores
- Improved industry reputation as a business committed to quality and support of their customers
Finally, data contribution leads to improved client interaction and fewer default payments. The data allows for more productive communication with borrowers, which, in turn, leads to more positive interactions. Well-informed clients are more inclined to make timely payments, which boost their credit scores and encourage on-time payment behaviors going forward. This positive feedback loop is beneficial for credit professionals and clients alike.
What’s the risk of not contributing data?
Creditors that don’t contribute data to credit reporting agencies can experience negative consequences, such as:
- Lower client credit scores
- More defaulted payments
- More lost and/or incomplete information
- Missed opportunities
Each of these consequences is unpleasant on its own — but combined, they can be devastating.
How can you contribute data?
The reporting process is fairly straightforward, but it does require proper portfolio management. Some requirements to consider when reporting commercial data include:
- Data must be provided in the standard commercial layout
- Data must be submitted electronically
- Data must be complete, including all current, delinquent, collections, or charged-off accounts
The benefits of data contribution are undeniable. The analytics, alerts, and protections that contribution provides are invaluable to both credit professionals and clients. Plus, along with portfolio management, decision making and client interactions become appreciably easier.