Though the debate over tri-merge versus single-bureau credit pulls has gotten its fair share of press coverage in recent weeks, another proposal is gaining steam: a consumer-controlled, portable credit report model.
According to Brendan McKay, chief advocacy officer of the Broker Action Coalition (BAC), the system requiring that consumers pay for separate credit reports for every mortgage company they want to shop with is antiquated. Instead, he advocates for an option that would let consumers purchase their credit report and provide it to multiple lenders.
“Reducing the number of credit pulls from an average of 2.5 to a single pull would effectively lower the aggregate cost of credit reports from roughly $150 to about $60 for the consumer,” McKay wrote in a Feb. 6 letter to Federal Housing Finance Agency (FHFA) Director Bill Pulte, which was co-authored by the trade group’s executive director, Rachel Clark.
“Under a portable model,” the BAC letter continued, “a borrower could obtain their own report and securely authorize multiple lenders to access it using a reference number and appropriate verification, enabling meaningful rate-and-term shopping without compounding costs.”
BAC’s letter to Pulte, whose agency oversees government-sponsored mortgage investors Fannie Mae and Freddie Mac, also supported a proposal by the Mortgage Bankers Association (MBA). The MBA plan calls for phasing out tri-merge credit score requirements in mortgage underwriting — meaning reports that include data from all three major credit bureaus — in favor of a single-bureau framework for borrowers with an initial credit pull above 700.
The MBA believes a single-file framework would introduce competition into the credit scoring landscape that would drive down loan production costs and lower fees to borrowers.
But BAC additionally encouraged the FHFA to pursue the portable credit model. This proposal was met with opposition from a trade association that represents the credit bureaus, the Consumer Data Industry Association (CDIA).
Dan Smith, CEO and president of CDIA, spoke with Scotsman Guide about the issue and followed up with a statement.
“The portable credit score proposal is simply a solution in search of a problem,” Smith stated. “The tri-merge credit report exists for a reason; it promotes data accuracy, market competition and investor confidence.”
Smith continued: “Eliminating it undermines investor confidence, shifts risk to borrowers, investors and taxpayers, and erodes the integrity of the credit reporting system. Abandoning tri-merge is likely to drive investors to demand higher risk premiums on all loans.”
McKay, on the other hand, told Scotsman Guide that one of his favorite things about the portable credit model is that he “can’t think of a logical, pragmatic opposition to it other than the credit bureaus’ greed.” He expressed frustration that there seemed to be pushback on every attempt to address the high costs of credit reports.
“Are the credit bureaus going to push back on every attempt to get this problem under control? They always have a reason to be against it,” McKay said. “I would like to know if they feel that credit report costs have gotten too high, and if they have any obligation to address the problem, or if they are simply going to continue to reject every proposal that’s been put out there.”
Smith stated that the credit reporting companies — Equifax, Experian and TransUnion — manage the underlying consumer data and ensure compliance with all applicable federal and state laws. FICO, by contrast, provides an algorithm used by mortgage lenders that calculates a credit score using bureau data.
“The majority of recent price increases associated with mortgage credit pulls are directly tied to FICO’s continual pricing increases, which have risen approximately 1,600% since 2020,” Smith concluded.
Scotsman Guide emailed the FHFA, asking if it had reviewed BAC’s proposal, but had not heard back as of publication.
