Trended credit data, an enhancement to existing credit-scoring models, has been around for a few years. Fannie Mae began using trended credit data in 2016, allowing it to get a better understanding of borrowers’ spending patterns over a longer stretch of time. Now, Experian is getting in the game with a new product called Trended 3D.

Trended 3D provides the borrowers’ balances over the past 24 months and their credit line over the past 24 months, providing a longer view of consumer behavior than traditional reports. It aggregates that information so that it’s easy for borrowers to use.

“The ultimate goal is to help lenders make better decisions,” says Angela Granger, vice president of decision analytics at Experian.

Proponents of this data say it helps give certain borrowers access to credit who might have otherwise been denied under the older models.

How trended credit data works

When you apply for a mortgage, approval hinges partly on whether you pay your credit card bills on time. Now some lenders are looking beyond on-time payments. They’re also asking whether you pay off your credit cards every month, or if you carry balances from month to month.

What lenders want to see:

  • Mortgage lenders prefer it when you pay off your credit cards every month, so that you carry a zero balance into the next month.
  • Lenders are a little less enthusiastic if you carry balances every month but they’re shrinking because you’re making more than the minimum payment.
  • They would rather not see you make the minimum payment every month on your credit cards, especially if the balances are growing.

Are you a ‘transactor’ or a ‘revolver’?

Lenders have a term for consumers who pay off their credit card balances every month: “transactors.” Consumers who carry balances month to month are called “revolvers.” And when credit bureaus gather information on how you manage your credit card balances, the info is called “trended credit data.”

Until a few years ago, mortgage lenders didn’t use trended credit data, meaning they didn’t draw a distinction between transactors and revolvers.

Fannie Mae’s automated underwriting software considers trended credit data, looking at each loan applicant’s credit card payments for the previous 24 months. It’s important because more than 1,800 lenders use underwriting software from Fannie Mae, a government-sponsored enterprise that writes some of the rules for the nation’s mortgage lending.

When deciding whether to approve a loan and how much to charge in fees, Fannie Mae’s underwriting software considers many factors, including:

  • Credit score.
  • Overall credit report, including payment history, credit utilization and outstanding balances.
  • Size of the down payment.
  • Whether the loan is for a purchase or a refinance.
  • Type of dwelling (house, duplex, condominium).
  • Loan-to-value ratio.
  • Debt-to-income ratios.
  • Trended credit data.

Credit usage over time

Trended credit data doesn’t change the credit scores used by the mortgage industry. It’s one more piece of information that lenders use, Granger says.

“In the traditional credit report, you can see current utilization on a consumer’s credit report, so you might know that their credit utilization is 45 percent. What this trended data gives you is how they got there.” Granger says. “Were they always utilized at 45 percent? Did they used to be much lower utilized or are they ramping up in terms of utilization? Were they previously 60 percent utilized and so 45 percent is good for them? They’re actually paying down. These are important insights for lenders.”

Will it help more than hurt?

The credit bureau TransUnion says its research shows that the percentage of consumers in the highest credit tier — people eligible for the lowest mortgage rates — would increase from 12 percent to 21 percent by using trended credit data.

Consumer advocates mostly say they don’t have an opinion yet about trended credit data.

Fannie Mae says the overall percentage of loan applications that receive approval is expected to remain about the same.

It began as a sales tool

The credit bureaus started collecting and offering trended credit data as a marketing tool to help credit card issuers make targeted offers to consumers. As the credit bureau Equifax explained in a sales pitch to credit card companies: “Insight-driven marketing strategies built on actionable, trended data can impact your ability to positively connect with a customer when they have the greatest propensity to spend or respond to an offer.”

With trended credit data newly available, Fannie Mae ran an experiment in 2015. It took a set of existing mortgages and looked back, using 3.7 million credit reports with trended credit data, to see whether the information would have helped Fannie make better loan decisions. The company concluded that trended credit data was worth using.

Fannie’s software uses trended credit data for conventional loans only, meaning it doesn’t use the information when making approval recommendations for Federal Housing Administration-insured or Veterans Affairs-backed mortgages.