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Appraiser's Perspective: Sharpening your tools for the recovery

National Mortgage Professional
Nov 18, 2007

TransUnion delivers solution mitigating authorized user abuse: Solution targets abuse, identifies legitimate useMortgagePress.comCredit reporting,authorized users TransUnion, working with six of the top 10 mortgage lending institutions, has developed a customized approach that enables lenders to identify consumers who may have added authorized user accounts to artificially inflate their credit report and standing. This tailored, analytic approach was applied to nearly 2 million approved mortgage applicants in which TransUnion examined the extent authorized user accounts were being used to potentially boost credit scores. Taking a look at mortgage approvals during a three-month period (July-September 2006), TransUnion recognized that approximately 50 percent of this loan pool was potentially impacted by this practice. Based upon this analysis, TransUnion developed a set of highly predictive credit characteristics. Through a combination of these credit characteristics, TransUnion can help lenders identify consumers who may have significantly improved their credit profile by adding authorized user accounts to their credit file. TransUnion's solution can immediately assist lenders in improving their assessment of credit applicants and collection practices on recently approved loans. By strategically deploying a combination of authorized user and non-authorized user credit characteristics, TransUnion offers a tailored solution that will notify financial institutions of potential artificial score inflation. The solution is customized according to a lender's specific credit criteria and risk threshold, and is available online or in batch delivery. Once these questionable authorized user trade lines have been identified by the customer, TransUnion's real estate division can initiate modifications to the TransUnion credit file that allows customers to obtain a re-scored TransUnion credit report absent the authorized user trades. Add to that TransUnion's ability to monitor and trend market activity as it relates to this abusive practice, and the benefits of the solution to price mortgage loans based on real risk versus an inflated value becomes even more appealing. "The practice of artificially boosting one's credit score is not just limited to the mortgage industry, and the practice is not going to go away for quite some time," said Dina Anderson, senior director, Analytic and Decisioning Services. "The key is to help the industry and our customers determine the difference between a legitimate use of an authorized user trade line and provide a meaningful risk assessment when the practice is being abused." TransUnion's analysis concluded that the vast majority of the newly approved mortgages were legitimate users of authorized trade lines. However, by using a newly created set of credit characteristics focused on this industry-wide issue with an advanced analytic platform, TransUnion was able to identify small, manageable pockets of consumers that were up to 70 times more likely to exhibit suspicious authorized user account patterns. These high-risk consumers demonstrated a significant, recent change in their credit profile and subsequent credit score by adding authorized user accounts to their respective credit history. In addition to its tailored approach, all of the TransUnion developed risk models, including VantageScore, the newest industry scoring model, do not take into account authorized user trade lines when calculating a risk score. "As the market adapts over the next several years in terms of the way it manages the risk of the authorized user practice, VantageScore and TransUnion's custom authorized user solution provides lenders with an immediately available solution to more accurately assess the credit risk of a consumer with authorized user accounts," said Anderson. For more information, visit
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