Your credit report can be a little intimidating when you attempt to decipher all the codes, terminology and notations it contains. Contact the credit bureau to get clarification on suspected errors or things you don’t understand. Consider using a credit monitoring service to keep up with changes to your report as new information and codes are added. One curious notation you might find on your credit report is a “Data Factoring Account.”
Data factoring, also known as invoice factoring, debt factoring or accounts receivable factoring, is a reference to transaction activity that has occurred on the business side of your debt. Specifically, some companies, in order to increase cash flow or improve their credit standing, may choose to sell off some of their accounts receivable in good standing – non-delinquent accounts that owe them money – to a third party rather than wait for the payments to come in.
How Data Factoring Works
For example, say your credit card company wants to conduct a major expansion campaign but is short of the cash needed to finance the campaign. It decides to sell several of its receivable accounts to a third party. The third-party company buys these accounts at a discount, your account included, providing the creditor with cash that can be used immediately, although it is not the full amount owed. The third party makes up the difference in what was paid for the accounts by collecting the original total amount owed from the borrowers. In essence, the credit card company takes a bit of a loss in order to receive cash up front, while the third-party company receives more than the cost paid for the accounts but takes the risk that all accounts may not be repaid. This all happens behind the scenes and may appear on your credit report as a data factoring account.
No Affect on Debtor
A data factoring account listing just means that your creditor sold your bill to another collector rather than wait for you to pay it off. This is not a cause for concern on your part. The third-party company that purchased the debt is not a collection agency. It cannot submit negative information about you to the credit bureaus, and having the notation on your account does not affect your credit score.
Monitor Your Credit
Just the same, keep an eye on your credit report; monitor it periodically and make sure you understand what it contains. Look for errors or information you feel does not pertain to you. Occasional mistakes do happen, and information can be appended to your report that’s not yours. You should also look for information that indicates identity theft. Have errors removed as soon as possible after discovery.
Roz Swartz Williams is a feature writer for NVHG.org, with more than 20 years' experience in copywriting and design for private industry, defense contractors, non-profits and online education. In her spare time, she is a self-published novelist and mixed media jewelry artisan.