Opponents counter that the tri-merge mannequin protects debtors by revealing errors or lacking information throughout bureaus. They warn a single-file method may allow rating “gaming” by permitting lenders to keep away from decrease scores, and that might profit lenders somewhat than shoppers.
Eric Ellman, president of the Nationwide Client Reporting Affiliation (NCRA) mentioned we discovered from the 2008 housing disaster that “extra information is healthier than much less information, particularly when the monetary stakes are so excessive.” He added, “The cost of being proper for spending an additional $100 is a lot stronger a case to make than the draw back danger for a client who would possibly lose hundreds over the lifetime of a mortgage.”
On the middle of the dispute is the truth that the three main credit score bureaus don’t obtain an identical information from collectors and lenders, elevating questions on how eliminating recordsdata may have an effect on danger throughout the mortgage ecosystem — together with Fannie Mae, Freddie Mac and different traders — in addition to borrower pricing.
Info asymmetry
Many shoppers have skinny credit score recordsdata — or none in any respect — because of restricted monetary exercise, whereas others have information reported to just one bureau. As a result of lenders and collectors are usually not required to furnish data to all bureaus, reporting throughout the system may be uneven.
“Our members compete on a regular basis on information – the higher information now we have, the higher our report is,” mentioned Dan Smith, the president and CEO of the Client Knowledge Business Affiliation (CDIA), a commerce affiliation representing the patron reporting business. “There’s no regulation requiring a lender to furnish it.”
Smith mentioned reporting varies by establishment: main banks and nationwide bank card, mortgage and auto lenders sometimes report back to all three bureaus, whereas smaller lenders, debt patrons, group banks, credit score unions and various information suppliers could report back to just one or two.
“There are additionally variations within the timing of when information is reported,” mentioned Ellman. Federal guidelines assist guarantee consistency in furnished information, however no customary governs timing, and a one-size-fits-all report may depart lenders with an incomplete client image, he added.
In a January white paper, the Group Residence Lenders of America (CHLA) mentioned every bureau is investing in several information: Equifax in utility and telecom information, Experian in rental information, and TransUnion in recurring client funds.
“Undisclosed debt danger will increase with only one bureau, one rating,” the CHLA wrote. “Gaming or rating fishing can be incentivized. Lenders may pull 3 credit score scores, however solely ship with 1 credit score rating, thus avoiding the inferior credit score rating.”
About 25% of tradelines are usually not reported to all three bureaus, in keeping with credit-reporting and mortgage business sources who’re towards a single file, although no formal research was offered.
Impacts on the mortgage stage
Variations in credit score reporting can result in significant variation in client credit score scores, finally affecting the value a lender affords a borrower, in keeping with a number of research.
A 2023 S&P analysis of roughly 23,000 residential mortgage-backed securities loans over the previous decade discovered that the hole between a borrower’s highest and lowest bureau rating averaged 25–30 factors — sufficient to have an effect on mortgage pricing and eligibility.
Rating dispersion additionally varies by credit score tier. The typical distinction between the very best and lowest scores in a tri-merge file is roughly 20 factors for debtors within the 800–825 vary, in contrast with about 45 factors for these within the 550–575 vary. The research notes this may occasionally mirror opposed credit score occasions, doubtlessly tied to geography.
Separate analysis launched in early February by the American Enterprise Institute, utilizing ICE origination information for all first-lien buy loans between 2019 and 2025, discovered that debtors with scores above 700 have a mean high-to-low unfold of 26 factors throughout bureaus.
Due to rating variation, 31% of debtors with a 700+ rating may transfer up one loan-level value adjustment (LLPA) bucket by deciding on the very best bureau rating versus a tri-merge, 8% may transfer up two buckets and 4% may transfer up three.
Cutts’s October evaluation additionally concluded that traders in mortgage-backed securities (MBS) would demand larger compensation for the danger from single-bureau stories. This might increase rates of interest by 0.125% for each 20 factors the rating distribution shifts upward because of bureau choice, outweighing potential borrower financial savings from utilizing a single bureau report.
The chance to the system
The AEI evaluation centered on debtors with credit score scores above 700 — the identical threshold proposed by Broeksmit for shifting away from the tri-merge requirement. He famous the MBA’s 46-member Residential Board of Governors reviewed historic information on tradeline protection, credit score scores and mortgage efficiency earlier than supporting a coverage permitting a shift towards a single-file framework.
An MBA spokesperson mentioned the report isn’t public however that members agreed that, with guardrails like limiting eligibility to debtors above 700, the business may transition to single-file reporting. The spokesperson additionally cited a Broeksmit weblog urging Federal Housing Finance Company (FHFA), Fannie and Freddie to refresh their very own evaluation of single-, bi- and tri-merge credit score reporting to raised inform the coverage debate.
Underneath the MBA proposal, lenders may submit a single credit score report for debtors over 700, whereas these preferring tri-merge for aggressive or danger causes may proceed utilizing it.
The 700-score threshold displays the sturdy credit score high quality of GSE loans. Public disclosures present common GSE scores round 757, roughly 75% above 740, and solely about 6% under 680. MBA argues that requiring three recordsdata and scores is more and more an “anachronism.”
AEI’s analysis, in the meantime, evaluates how rating dispersion and reporting variations at this credit score tier may affect default charges – or the danger to the system. It concluded that credit score rating efficiency is broadly related throughout bureaus, with no significant variations in predicting mortgage outcomes.
“There’s actually advantages of the tri-merge, however these advantages are somewhat bit small,” mentioned Tobias Peter, senior fellow and the co-director of the AEI’s Housing Middle, in a presentation of the outcomes.
