Posted by Eric J. Ellman
When I was growing up I would hear stories from my parents and their friends about having to go to the bank to apply for a loan. They had to bring, it seemed, every financial document they could find for the last two years for a bank worker to pore over to see if they qualified for a loan.
Well, for many people, this no longer happens. The information age has transformed the credit industry by increasing speed, opening economic opportunity to marginalized communities, effectively eliminating human bias in the lending process, and increasing the accuracy of credit reports. One tool lenders now use to get a fuller picture of a consumer’s situation is called “trended data.”
Credit bureaus, like Equifax, Experian and TransUnion, produce credit reports. Credit scores are then created by different companies using the information in your credit report. The two main credit scoring companies are FICO and VantageScore. Credit reports show a long history of your credit situation, but traditionally a score would be run on a particular day and give a lender a “snapshot” of where you are with all of the information up to now.
CDIA recently released a study on the value proposition of the credit reporting industry, which describes trended data and how it can empower better decisions. Rather than taking a snapshot of your credit history, trended data gives a fuller picture – more like a film that tells you what happened up to now. This gives lenders more and better information that they can use to tailor a loan product to your specific needs. So, if you have one missed payment, but everything else is going well, that one missed payment isn’t going to be as impactful on your credit score, because the trended data will give a lender a fuller picture of your situation.
The credit ecosystem is changing all the time, and this innovation helps consumers get the right credit for their unique needs.