Ready to renegotiate your credit bureau contract ? Read this first

As lenders continue to evolve their credit risk strategies, perfecting how you buy credit bureau data is an important part of that process. But if your process for buying data has weak spots you could end up paying more than your peers and have poor quality data.

In short, having a sound data buying process is critical. Gone are the days when extravagant bureau data prices are ‘normal’ or ‘the cost of doing business’, and procurement teams are simply seen as a necessary cost centre to manage this. 

Lenders have grown savvy to the lack of data pricing and quality transparency and are seeking change. 

In this article, we’ll explain the key considerations when buying credit bureau data and how to pay fair pricing rates. Essentially, we’ll help you to make the right purchase decisions. 

Let’s dive in. 👇

5 key considerations when buying bureau data

When buying bureau data, there are several key priorities to consider. Here’s a round-up of the key considerations:

1. Streamline internal processes (before negotiating with a credit bureau)

When it comes to credit data buying, the best place to start is to get your ducks in a row. By this, we mean ensuring that internal teams are talking to one another. 

We always recommend getting a senior leader on board from across teams to advocate for exactly what they need. For instance, you might want to include someone from risk management, procurement, and operations.

Once you have your teams aligned, establish from the get-go what you need in terms of data quality, flexible contracts, and data pricing budgets. 

The highest quality data, at the best price – and on a flexible contract – translates into better risk decisioning, higher accept rates, and increased profit margins.

2. Know where to find the best data at the best price

Once you know exactly what you need, you can start looking at suppliers. 

As you probably know, the main suppliers are Equifax, TransUnion, and Experian. While they all have similar data, there are major differences in data quality, availability, and price – as reported by the FCA in its recent Credit Market Review. 

At the same time, there is a distinct lack of transparency within the industry, and without the right insight, it’s hard to know where to turn to.

So to find the best prices, you need access to data benchmarks (more on this next). Another key point is to ensure the data you buy is accurate and of high quality. 

3. Benchmark based on pricing and data quality

Many lenders are unaware that different rates are being paid by different customers to the credit Bureaux – for the same data and spend footprint – and that this can be challenged. 

That’s why learning more about the data available from Bureaux, and, more importantly, the pricing offered to other lenders will allow you to compare pricing and understand where you sit in terms of the industry as a whole.

This also allows for evidence-based negotiations for contracts and enables credit risk and procurement teams to make a better judgement on whether to switch or stay with the same provider or providers.

Data benchmarking can provide a 25-50% reduction in costs for an organisation, increased volume allowances, improved commercial terms, and stronger client-vendor relationships.

4. Decide if you need flexibility in contracts

Once you are clear on which services you require from the bureaux, it’s important to consider if you need flexibility in contracts. And we highly recommend that you do this.

Why? Because changing contracts mid-term can be tricky when you come to a contract with no flexibility built in. But those issues are much easier to fix when you’ve considered any flex upfront.

Try to combat this issue by building the right flexibility into contracts. 

For example, you can negotiate tiered pricing for differing volume levels that will allow the use of an alternative bureau where necessary – without adversely affecting the existing rates to any great degree. Additionally, try to agree to a lower minimum spend where possible.

5. Negotiate the best data contracts

Lastly, there are a few final points to consider when negotiating data contracts. 

The first thing to look out for is setup charges for new products or new versions of existing services. Ideally, these should be limited. High set-up charges really only benefit the bureau and make it tricky for you to gain long-term value.

We also recommend that lenders negotiate to carry forward unused minimum spend within the contract term to smooth out market fluctuations and avoid losses. 

Also look for innovation pots, which are offered to many customers as standard. This is often a voucher-based system that allows the customer free spend to trial or move to new search types, data sets and decision systems. 

Last but not least, ensure there is a strong Force Majeure clause in the contract to allow for events outside of control that may affect usage and minimum spend losses.

In summary, don’t forget these three things

Once you have a clear idea of all this, there are a few things you should do to set the relationship up for success:

• ⚖️Scalability and flexibility: Lenders need a data contract that can scale or reduce in line with peaks and troughs in demand. 

• 💰Cost and budget: Before selecting a credit bureau, you should consider the cost compared to what competitors and peers are paying for access to the same data and scores. 

• 💼Compliance and regulations: Lenders need to make sure that data is compliant with relevant regulations, such as Anti Money Laundering and Consumer Duty to avoid future legal and financial penalties. 

In short, it’s very important to take into account all these aspects before buying data. Failing to do so can bring negative consequences to the lender, for example:

• Limitations in your ability to accommodate future growth or changes in the credit industry because data contracts are not scalable or flexible. 

• Costly fees and reputational damage because the data didn’t meet industry regulations and standards.

• Poor risk-based decisions due to bad quality data.

• Low accept rates due to inadequate data on individuals.

• Significant waste of resources and budget because the data is not cost-effective or does not provide value for investment.

To alleviate this burden, lenders worldwide are talking to external experts to make the data buying process smoother, easier, and far more cost-effective. This helps eliminate the guesswork in credit data buying with transparent insight into data prices, quality, and accuracy that requires minimal effort from you.