Multiple credit bureau pulls increase odds for auto loans

May 30, 2018 @ 11:42 am

Jackie Charniga

 

The difference in consumer credit scores among Experian, Equifax and TransUnion is between 40 and 50 points on average, according to 700Credit managing director Ken Hill. Photo credit: DAVID PHILLIPS

A consumer’s credit score range could vary as much as 100 points among the three credit bureaus, according to 700Credit. To give auto loan borrowers more options, dealerships should pull credit scores from multiple bureaus and encourage their lending partners to accept scores from two or even three bureaus, rather than just their primary source, executives say.

Factors such as old data or reporting errors could adversely impact a credit score at one bureau compared to another, said Susan Burke, vice president of product and marketing at 700Credit, a supplier of credit and compliance solutions to dealerships.

“It all comes down to what their lenders want, accept, or demand,” Burke told Automotive News. Dealerships are “only going to pull what their lender wants to see.”

Wide range of tiers

The difference in consumer credit scores among Experian, Equifax and TransUnion is between 40 and 50 points on average, according to 700Credit managing director Ken Hill. But it could be as wide as 100 points, a divergence that could move a customer from one of the bottom credit tiers to the highest.

For example, Experian and TransUnion could present similar FICO or Vantage scores in the prime credit tier, but Equifax’s calculations could place that same customer several tiers down.

“If the dealer only pulled Equifax, they might have lost the deal due to the higher interest rate offered because of the lending tier the customer fell in to,” Hill wrote in a blog post.

About 25 percent of 700Credit’s nearly 10,000 dealership clients pull from all three bureaus every time, Burke said. Forty percent — or 4,000 dealerships — pull from only one.

If a lender accepts the best score presented, the number of loans arranged by the dealership for customers who may have been turned away based on the score of one bureau will likely increase. Pulling all three scores will also qualify customers for the best interest rate available, which could in turn allow dealers to make more finance reserve on a loan, she added.

Variance explained

How the data is maintained also affects the score at any credit bureau. Not all lenders report to each of the major credit agencies, which means information can be missing from one bureau’s report and included on the report from another bureau, Hill said.

Lenders also report their data to credit reporting agencies on different dates. Scores could reflect fresh data from a lender at one bureau, and 3-week-old data at another.

Dealers should work with their lenders to determine which would look past a score from the primary bureau to accept scores from the other two bureaus, especially if a customer falls a few points short of the next best tier, Hill said. In a recent 700Credit study, three-quarters of applicants with scores pulled from three credit bureaus had risk scores that varied by more than 20 points. In order to leverage the full spectrum of credit scores, Burke said, dealers should work with lenders that accept multiple scores. Savvy dealers will sometimes send the customer’s credit scores to several banks to see who comes back with the best offer.

Dealerships refer to the same bureau or bureaus often out of habit. The F&I managers often pull from the same bureau every time, as their predecessors taught them, Hill said. Strategies around deciding how many bureaus to pull from, and importantly, when and why to pull from them, should be incorporated into the training process, he added, so that the dealership stays up to date even after turnover.

You can reach Jackie Charniga at jcharniga@crain.com — Follow Jackie on Twitter: @jccharniga

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