Today’s newly published research delves into the dynamics and patterns between commercial and consumer credit reporting for small businesses, offering a detailed examination of how often and what types of commercial credit appear on consumer credit reports, alongside the varied reporting practices and strategies that can significantly affect borrowers.
Commercial Credit Reporting on Consumer Reports: The study reveals that, on average, over 2.8 million consumers have commercial or business credit product information listed on their consumer credit reports each quarter. From 2012 to 2019, there was an average quarterly reporting from over 1,300 lenders, predominantly banks and credit unions, to a nationwide credit reporting agency. Among the types of credit reported, business credit cards topped the list, with business loans, commercial installment loans, and agricultural loans also being noted.
Quarterly Overview of Business Credit Products: Data from Q1 2012 to Q4 2019 shows the number of consumers with open tradelines, the count of accounts, and the number of reporting entities.
Diverse Reporting Practices: While the data indicates a significant volume of tradelines, this represents just a fraction of commercial loans. A comparative analysis of bank furnishers to the total number of banks with commercial credit indicates that a vast majority, at least 89%, do not report to consumer credit bureaus.
Moreover, lenders that do report often exclude certain accounts and products from consumer bureau reports or only report accounts that are substantially overdue. This selective reporting can impact the consumer credit reports of business owners in various ways. The inconsistency in reporting strategies means borrowers might not fully understand the impact of commercial credit on their consumer credit reports, particularly when applying for business loans. Strategies that only report negative information prevent business owners from showcasing a positive payment history.
This pioneering research lays the groundwork for understanding the interplay between commercial and consumer credit reporting. It sets the stage for future studies on commercial credit, including the impact of the COVID-19 pandemic on reporting practices.
Study on Commercial Credit Impact on Consumer Credit Reports: This report leverages data from the Bureau’s Consumer Credit Panel, which consists of a longitudinal sample of around five million anonymized credit records from one of the three nationwide credit reporting agencies. It is part of the Consumer Credit Trends series, which aims to explore and analyze developments in the consumer credit market.
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