When it comes to writing loans, knowing information about the borrower is vital. Debt, loan history, and credit scores are all vital factors that not only determine the price of a loan, but whether someone is even eligible for a loan. So, when it comes to sourcing this data, getting as much information as possible is key. Consequently, most lenders have relied upon a tri-merge credit report.
Tri-merge credit reports work by ordering information from the 3 major credit bureaus: TransUnion, Experian, and Equifax. Once you have the credit information from all 3 sources, lenders take the median of the 3 credit scores and use it for loan eligibility and pricing. While 3 may feel excessive, using reports from 1 or 2 bureaus can lead to a large variance in a consumer’s credit score. In fact, missing just 1 bureau changed 35% of borrower’s scores by 10 points or more. This could kick a consumer’s price into the incorrect price bucket, which is to the detriment of either lenders or borrowers.
Ultimately, if you want to make sure that loans are priced properly, having all the information is key. Making sure to order reports from all 3 credit is the most effective way to ensure that the right loans are being given out.
Source: Equifax