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Using Data to Expand the Credit Box

frozen-creditIn 2017, as many as 1.5 million consumers could see improved access to credit, as well as better loan terms, thanks to the introduction of trended credit data late last year.

This data, which provides lenders up to 24 months of a borrower’s payment history—including their scheduled payments, past balances, and actual payments—was first introduced in September 2016 as part of Fannie Mae’s mortgage underwriting process.

And according to Equifax’s December 2016 Consumer Credit Impact analysis released Wednesday, the data is poised to make a huge impact.

“Trended credit data could mean an approximate increase of 4 percent or 267,000 more mortgages being issued to consumers who may have been previously ineligible,” an announcement from Equifax stated. “For HELOCs, approximately 65,000 more accounts or 4.1 percent more lines of credit could be issued to consumers.”

Prior to the introduction of trended credit data, lenders only had access to a buyer’s total outstanding credit balance, their overall credit availability, and their utilization of the availability.

“Giving weight to how borrowers pay off credit debt puts more power in their hands to manage their credit evaluation,” said Peter Maynard, SVP of Global Analytics at Equifax. “New ways of assessing consumer credit behavior through unique insights is something we are continuing to develop at Equifax, and opportunities to expand credit to consumers and mitigate risk for lenders make these type of approaches solid ones for the entire marketplace.”

Now, with trended data, lenders can get a more in-depth glimpse at a buyer’s payment style and abilities, seeing whether they pay off their balance in full each month, pay a small portion, or just pay the minimum required payment.

“As an example, one consumer might pay off their balance monthly or pay more than the minimum amount due,” the announcement stated. “While another consumer might make only the minimum payment due almost every month, yet still on time. Assuming both their credit histories and loan characteristics are otherwise about the same, including the fact that they both pay on time, the consumer that pays off their balance monthly or pays more than the minimum amount due would typically be considered a lower credit risk based on their trended data attributes.”

Trended data will also expand access to auto lending access as well.

“Auto loans are expected to see the most significant impact with an anticipated 1.1 million more auto loans either being issued or receiving more favorable terms,” the release stated.

About Author: Aly J. Yale

Aly J. Yale is a freelance writer and editor based in Fort Worth, Texas. She has worked for various newspapers, magazines, and publications across the nation, including The Dallas Morning News and Addison Magazine. She has also worked with both the Five Star Institute and REO Red Book, as well as various other mortgage industry clients on content strategy, blogging, marketing, and more.

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