Building on new and disruptive ideas to help our business clients and consumers alike is the primary goal of technological innovation at TransUnion. Over the last few years we’ve worked tirelessly to incorporate the use of trended credit data to show a more precise picture of a consumer’s ability to manage financial commitments.
Demonstrating the importance of historical data for lenders and the benefit for consumers, Fannie Mae—the leading source of funding for mortgage lenders—now requires the use of credit reports that support trended credit data when underwriting single-family mortgage applications through Desktop Underwriter® (DU®).
We applaud Fannie Mae for their industry leadership and encourage other mortgage lending agencies to follow suit by analyzing the value of trended credit data.
In what the National Consumer Reporting Association called “the greatest change to the mortgage credit reporting process since the adoption of the credit score,”1 Timothy Mayopoulos, CEO of Fannie Mae, last year announced plans to require trended credit data when evaluating single-family mortgage applicants.
Citing “smarter, more thorough analysis of a borrower’s credit history,” and an ability to “help creditworthy borrowers obtain access to mortgage credit and sustainable homeownership,”2 the announcement followed careful analysis of loan performance modeling.
This week, Fannie Mae implemented DU Version 10.0—which will use TransUnion trended credit data—to enable greater confidence and efficiency in the origination process.
Both TransUnion and Fannie Mae analysis found that trended credit data empowers creditworthy borrowers. Fannie Mae’s study revealed3 that including trended credit data in DU will improve the accuracy of credit risk assessment and will benefit borrowers who regularly pay off revolving debt.
Trended credit data reports from TransUnion show up to 30 months of a borrower’s credit history. This allows insights into trajectory and velocity of changes in consumer financial behavior over time, revealing important information such as historical change in credit balances and actual payment amounts. These are two examples of behaviors that cannot be examined using traditional credit reports and risk models.
In addition, consumers may potentially realize greater access to credit products with favorable lending terms.
A TransUnion analysis4 found that using a credit score powered by trended credit data has the potential to positively impact many consumers in the housing market through greater access to mortgage loans and better pricing. Research indicates that the percentage of consumers in the Super Prime risk tier, who generally have the greatest access to new loans at the lowest pricing, could increase from 12% of the population to nearly 21%.
By using trended credit data, lenders can potentially:
- More accurately predict consumers’ performance
- Gain access to newly credit-qualified consumers who may have previously been at or below the lender’s credit risk tier cut-off
- Gain a competitive advantage in their ability to shift the risk and volume relationship to price more competitively
We’re excited about the benefits to both lenders and consumers, made possible by the powerful insights of trended credit data. The Fannie Mae announcement marks another milestone in the adoption of trended credit data, as lenders from across industries see the value of deeper and broader consumer insights.
3- Rosenblatt, Eric. March 8, 2016. Trended Credit Data Improves DU Risk Assessment and Supports Access to Mortgage Credit
4- TransUnion CreditVision Study: http://transunioninsights.com/CreditVisionStudy/