When it comes to credit reports for mortgages, the tri-merge standard has long been the method used. However, recently there have been proposals to decrease it to a single or bi-merge instead. Unfortunately, there are many issues that this change could cause. One of the main deterrents is that it encourages “score shopping”. This would allow consumers to pick the single score that would produce their desired lending outcomes. This would further complicate things by potentially artificially inflating one’s purported credit score by 20 or even more points.
The benefits of using a tri-merge standard are that it utilizes the median of three scores instead of allowing lenders to simply pick the best score, which, in turn, could cause higher approval thresholds for everyone. Additionally, it keeps consumers’ scores more accurate and maintains a complete picture by capturing the fullest risk profile available and ensuring fair and accurate loan pricing.
This approach also prevents score manipulation and aids in stabilizing the market. While some may argue that a tri-merge standard is overkill, there are many risks associated with changing it.
Source: Equifax
