Could Portable Credit Reports Cut Mortgage Costs in Half for Homebuyers?

Some see asking consumers to pay for separate credit reports each time they apply to a mortgage company as outdated and overly expensive.

That’s where a portable credit report comes in as a potential solution in reducing costs for homebuyers and other borrowers.

No longer would they need to pull their credit report multiple times when applying for a home loan. Instead, they would have one portable credit report they could then share with multiple lenders.

“We encourage people to compare lenders to find the best rate, and those duplicate credit pulls can add up,” April Lewis-Parks, Director of Financial Education and Communications, from the nonprofit credit counseling firm Consolidated Credit, told us.

“The current system creates unnecessary costs for borrowers because every time a lender pulls a credit report during the process, there is a fee attached,” she continued.

Advantages of a Portable Credit Report

Lewis-Parks said the key advantages to a portable credit report would be reduced fees and greater control over how credit information is shared.

“Financial systems are evolving, and people increasingly expect transparency and control over their data. Portable credit reporting is one idea that reflects that shift, but the challenge is executing it in a way that protects both consumers and the integrity of the lending process,” Lewis-Parks told us.

“In today’s digital world, it’s reasonable for borrowers to get their credit report once and share it with multiple lenders while shopping for a mortgage.”

Downsides to Consider

Mike Pearson, Senior Vice President of Business Development at A&D Mortgage, had this to say about the concept of a portable credit report. 

“The idea of having one report, one fee, and granting access to that report to the lenders of choice, seems very logical. So that seems very consumer positive,” Pearson told us.

But he pointed out there are costs and downsides to consider with portable credit reports.

“Like any change, there are potential downsides. Access to the report, what does that involve, what technology is required to access and evaluate that report? What is the cost of integrating a new system and flow in this model? How much of that cost is passed down to the consumer?” Pearson told us.

“Technology systems are very expensive, does the cost of executing this model outweigh the savings created by doing it in the first place?” he continued.

Potential Savings 

Brendan McKay, Chief Advocacy Officer at the Broker Action Coalition, wrote in a letter to the Federal Housing Finance Agency that he was in favor of an option that allows a consumer to purchase their credit report and then provide it to several lenders.  

McKay estimates that reducing the number of credit pulls from 2.5 to a single pull would reduce the overall costs of credit reports for consumers from about $150 to about $60.

Pearson points out there is already a way to shop for a mortgage using a single credit pull and that is to work with a mortgage broker. 

“If a borrower is going through a mortgage broker or independent mortgage banker, they, in most cases, only need one report today, which can be reissued to multiple lenders,” Pearson told us.

Tri-Merge Versus Single Bureau Credit Reports

There is debate over mortgage credit report pricing. Should the standard tri-merge credit report continue for mortgages? Or will less expensive bi-merge or single credit bureau credit reports become acceptable?

A tri-merge credit report relies on data from all three major credit bureaus, TransUnion, Equifax, and Experian. A single bureau report would come from just one credit bureau, and a bi-merge report would use data from two credit bureaus.

The tri-merge credit report remains the standard for mortgages sold to Fannie Mae and Freddie Mac, though industry groups are pushing FHFA to consider lower-cost alternatives such as single-bureau reports in some cases. Single bureau credit reports are already used for auto loans, home equity, and unsecured consumer lending. 

“Technology systems are very expensive. Does the cost of executing this model outweigh the savings created by doing it in the first place?” — Mike Pearson, SVP of Business Development at A&D Mortgage

The Mortgage Bankers Association has asked the Federal Housing Finance Agency to end the requirement for a tri-merge credit report for loans purchased by Fannie Mae and Freddie Mac. Instead, they wish to give lenders the option of relying on a single bureau credit report if the initial report has a credit score of 700 or higher.

Who’s to blame for the more expensive pricing for tri-merge credit reports? FICO says it is markups from the three credit bureaus and nothing to do with its base pricing.

Industry groups says both FICO and the credit bureaus are to blame. According to the Community Home Lenders of America, credit scores have risen more than 10 times over the past four years.

The Bottom Line

Having a portable credit report would allow a consumer to purchase their credit report and then provide this report to lenders when they apply for mortgages or other loans. A portable credit report would save consumers from paying for multiple credit pulls when they shop around for credit.

Lower fees and greater control over one’s credit data are advantages of a portable credit report. One estimate says a portable credit report would lower consumer costs from $150 to $60. But downsides include the cost of the technology and whether these costs would be passed down to consumers.