What Is a Trended Credit Score?

Trended credit data is an improvement in the credit scoring models conventionally used today. The use of trended credit scoring started in 2016 when Fannie Mae applied it to understand the spending patterns of debt consumers over an extended period of time. Experian is now trying out trended credit as well. The credit bureau calls its product Trended 3D.

Trended 3D offers lenders information about borrower balances and credit lines over a period of two years. It improves on the information presented in traditional credit reports by offering a longer-term view of consumer behavior. In the end, the aim of the exercise is to help lenders learn more about borrower behavior. It helps consumers, as well. It gives some borrowers better access to credit than the traditional model allowed.

How does trended credit work?

When you apply for a car loan or mortgage, whether your application is approved or not depends in part on your behavior in the past as a debt consumer. If you paid all your credit card bills in full and in time, it enhanced your creditworthiness. Borrowers who carry balances over are considered the least desirable variety of applicants. Credit bureaus and lenders that use trended data look closely at your credit card usage behavior in these ways, something the past credit scoring models did not look at.

They even have words to describe consumers who pay off their balances in specific ways. Those who carry their balances forward are called revolvers. Those who pay their balances off in full each month are called transactors.

Credit underwriting software created by Fannie Mae is used by hundreds of lenders across the country. Since Fannie Mae’s software uses trended credit, all these lenders, by extension, use it too. The software looks in detail at credit card usage and payment patterns over 24 months.

Trended credit shows credit usage as it evolves over time

When a lender uses trended credit, it doesn’t change the way they see credit scores. Instead, it simply shows creditworthiness in a new angle, one that evolves over time. For instance, with traditional credit reporting, lenders saw a snapshot — if a borrower currently had a credit utilization of 30 percent; that was all lenders saw. With trended credit, they see how their credit utilization rises and falls each month. They might find that credit utilization was lower in the past. It would make that consumer a more attractive one for a loan.

Whom will it help?

Research by the credit bureaus has shown that trended credit is likely to help the most creditworthy mortgage applicants. While the overall number of those receiving approval is likely to remain the same, trended credit scoring is likely to almost double the number of applicants given the lowest interest rates.

The trended credit system began life as a sales tool to help credit card companies find the best applicants to offer their products to. It worked well there and made the shift to mortgage and car loan lending. If you belong to the tier of consumers that usually receives the best offers, you might find that with the introduction of trended credit, your offers get better still.