Trimerge Credit Report - Which Score on AAN?

We pull a tri-merge credit report showing credit scores & factors for all 3 credit bureaus. When we have multiple applicants, we choose the middle score for underwriting purposes. Say the middle score is from Applicant #2. That is the score we use in underwriting.

When generating an adverse action notice, each applicant should get their own AAN with their own credit score details. We're finding that our system is pulling the credit score that we relied on in underwriting and reporting that score and the factors on BOTH adverse action notices.

That would not be correct for Applicant #1, would it? For Applicant #1, should we disclose the middle score from their report - even though it was not the actual score used in our underwriting?

How do others disclose this in an AAN? Our Credit Score Disclosure Notice does disclose all 3 credit bureaus and their scores and factors. Should we be disclosing all 3 for the AAN, too?

I found my answer. We would disclose the agency that created the tri-merge report as the credit reporting agency in our AAN. And since we use the middle score of the 3, we would provide each co-applicant with an AAN that reflects their own middle score and factors that impacted that score and the range of scores for the agency that provided that score.

There have been other discussions about this. Our software does not allow for entering two different agencies....one for where the report came from and one for the agency from which the score was used.

Part of the discussion was as to whether the agency that creates the merged report is a "credit reporting agency." I can't remember who...posted that it very definitely meets the description in the FCRA. My question is....if the customer contacts the tri-merge vendor, can the vendor give the customer a copy of the report?....which is the whole purpose of providing the name, address and phone number.

Application of the FCRA to resellers of credit reports and sellers of software.

The Staff Summary clarifies the application of the FCRA to resellers of credit reports as distinguished from sellers of software used to procure such reports, following the Commission’s enforcement actions in this area and a 1997 informal opinion letter.

A 1999 consent order, involving the seller of a “merged” report (which combines information from two or three major CRAs), requires the respondent to comply with the duties that the FCRA imposes on CRAs.

I am not sure my answer above (copied below) is correct. In looking at a recent AAN, we had 2 applicants and a tri-merge report. Applicant #1 had scores of 768, 774 and 777; Applicant #2 had scores of 779, 789 and 795. Our software used the score of 777 in the decision making. This is the top score for Applicant #1. No score for Applicant #2 was used in the decision. So, for our AAN, would we show the 777 for Applicant #1 (even though it is his top score); and for Applicant #2, would we disclose his middle score of 789 in the AAN? I am not sure which score (and associated key factors) should be shown for each of the applicants in their AANs?

From above: I found my answer. We would disclose the agency that created the tri-merge report as the credit reporting agency in our AAN. And since we use the middle score of the 3, we would provide each co-applicant with an AAN that reflects their own middle score and factors that impacted that score and the range of scores for the agency that provided that score.

You had 2 applicants with average scores in the 770s and 780s respectively and declined them . . . must have been some loan request!

I'm confused. You say " Our software used the score of 777 in the decision making. This is the top score for Applicant #1." But then you say "since we use the middle score of the 3". It sounds like you used the top score, not the middle score. You also say "No score for Applicant #2 was used in the decision."That would be hard to defend since the score of Applicant #1 was used and Applicant #2's scores are available.

I'd recommend looking at your system and determining how it really works and then we can try to help you with your question.

Were the credit scores relied on in taking the adverse action?

https://consumercomplianceoutlook.o...ion-notice-requirements-under-ecoa-fcra/

The requirements are different for multiple applicants. According to Regulation B, if multiple applicants submit an application, notice need only be given to the primary applicant if the primary applicant is readily apparent.6 In the case of multiple applicants under the FCRA, the statute has been interpreted to require notice to all consumers against whom adverse action is taken if the action taken was based on information in a consumer report.7 If the applicants’ credit scores were used in taking adverse action, each individual should receive a separate adverse action notice with the credit score and related disclosures associated with his or her individual consumer report; however, an applicant should not receive credit score information about a coapplicant. Regulation B does not prohibit delivery of an adverse action notice to each applicant. If applicable, financial institutions can provide a combined notice of adverse action to all consumer applicants to comply with multiple-applicant requirements under the FCRA, provided a credit score is not required for the adverse action notice because a score was not relied upon in taking adverse action.

Now with that said if we use the middle score for each applicant to determine which score will be weighted in the credit decision, and if the score played a part in the adverse action we disclosed each applicant's middle score on their respective AAN.

We use Encompass and it pulls a trimerge report for the 2 borrowers. It then looks at the 6 scores, puts them in order from low to high and then it takes the lower of the 2 middle scores - and uses that score in the decision making. So, I guess all 6 scores are looked at but the lower of the 2 middle scores is the actual score that we use in underwriting? (I apologize, my example above wasn’t a great one since the scores were so high!). So, based on how Encompass is choosing the one score for underwriting, when we have a decline, we are not sure which score to disclose for FCRA purposes on each individual’s AAN. Since only one score is used in the decision making (out of the 6 scores obtained), that score will come from only one of the applicants. In my example above, the score relied on just happened to be the highest score for Applicant #1 (not his middle score) - so would we disclose that higher score on his AAN? And for Applicant #2, none of his 3 scores were used in the decision making (but his scores were considered in determining the lower of the 2 middle scores of the 6) so we’re not sure which of his 3 scores should be shown on the AAN? Would this be a matter of “procedure”? Should we say in our procedure that we will always show the middle score for each co-applicant (and related factors) on his AAN regardless? Even though Encompass will look at all 6 and choose the lower of the 2 middle scores in the actual decision making? I hope this makes sense. Thank you for the responses above! (We do send a combined AAN & FCRA to each co-applicant.)

It sounds like you are relying on scores from each applicant to determine the lowest score. I would give each applicant their credit score.

Thanks. I’m not sure which score to show for each applicant though of the 3 scores that we obtain for each of them on the trimerge report?

You said your ssystme "takes the lower of the 2 middle scores - and uses that score in the decision making." I supposed those could both belong to the same applicant. If that's true, I don't know how you can automate this (systematically). You'll need to look at each decision and decide what score was used to accurately provide the disclosure.

OR
Change your system to evaluate the lowest of the middle scores. Then you would always have the middle score to disclose AND you would have the same result (lower of middle scores is used to evaluate the credit).

Well that is something you need to verify with your Encompass system. In one post you stated you use the middle score yet in another you stated the applicant's highest score was used. Which is it, middle or highest?

If you use the middle score for each applicant to determine the score to be used in underwriting then report the middle score for each applicant on their respective AAN. If you use the highest, report the highest, if you use the lowest report the lowest.

It is confusing. The system takes ALL 6 scores and then picks the lower of the 2 middle scores. So, when I said the highest score for applicant #1 was used in the decision, that’s because the highest score of applicant #1 happened to be the lowest of the 2 middle scores when looking at all 6 scores together. The system isn’t taking the middle score of each applicant and then choosing the lower score, it is looking at all 6 scores at the same time. So, if applicant #1 had scores of 1, 2, 3 and applicant #2 had scores of 4, 5 and 6. The 2 middle scores are 3 & 4. The lowest of the 2 middle scores (1, 2, 3, 4, 5, 6) is 3. And 3 happens to be the highest score for applicant #1. And applicant #2’s score were all higher than the lowest of the 2 middle scores. Anyway. Thanks.

So, if applicant #1 had scores of 1, 2, 3 and applicant #2 had scores of 4, 5 and 6. The 2 middle scores are 3 & 4

Then you are not using the middle score for each applicant. You are using the lowest score for Applicant 1 and the highest score for Applicant 2. Assuming the scores are listed highest to lowest.

I think you need to revisit the criteria setup in your software. Or if it's doing what it's supposed to be doing then you would report 3 for Applicant 1 on their AAN and 4 for Applicant 2 on their AAN.

Thank you everyone - I appreciate your help.