TransUnion Unveils New Solution to Protect Lenders From the Growing Threat of Credit Washing

TransUnion has launched a new tool to help lenders curtail the threat of credit washing. The innovative offering is the industry’s first tool to zero in on this form of fraud, according to a TransUnion press release.

The solution can help businesses avoid extending credit to people who may be riskier to lend to than their credit profiles suggest.

Credit washing occurs when a borrower, sometimes with cooperation from a dishonest business entity, attempts to remove accurate and legitimate information from their credit profile to boost their credit score and make them appear more creditworthy to lenders.

Though credit washing may not be the most common type of fraud a lender encounters, it can lead to substantial financial losses. Claims related to credit washing hit their highest mark in five years in 2024, according to a recent report.

“Credit washing continues to be a significant detriment to the credit ecosystem with lenders experiencing great financial loss from consumers whose credit and fraud risk is not accurately represented due to missing credit history,” Steve Yin, Global Head of Fraud at TransUnion, said in the company’s release.

The power of the credit bureau’s new tool is that it can help lenders uncover hidden risks before they become financial burdens, Yin added.

Helping Lenders Make Better Decisions 

Suppressing derogatory data may not appear to significantly impact a borrower’s credit profile. But TransUnion’s research reveals that, in certain cases, the practice can improve a consumer’s credit status overnight from subprime to super prime. 

Yin said in the release that people should keep in mind that credit washing is different from removing credit data that is inaccurate or illegitimate.

“On the other hand, when accurate data is suppressed for the purpose of presenting as a lower-risk borrower, that is a form of credit washing,” he explained.

TransUnion’s credit washing product employs a machine learning model that can uncover borrowers who have a history of charge-off suppression and may carry an increased risk of defaulting on new accounts over the next 12 months.  

TransUnion said the program, which the credit bureau will initially make available as an add-on to its credit and model reports, is appropriate for lender use during prescreen and prequalification processes.

TransUnion’s new solution can identify a consumer who may have an increased risk of defaulting on a new account over the next 12 months.

The rising costs of goods coupled with signs of a deteriorating labor market in the U.S. may lead to a rise in fraudulent activity in the country over the coming months.

Jason Laky, Executive Vice President and Head of Financial Services at TransUnion, said in the company’s release that by empowering lenders to identify and manage the risks of credit washing, the solution can ultimately allow them to make more informed decisions.

The credit bureau also offers a plethora of other solutions that lenders can leverage to prevent fraud from impacting their business.

“Our credit washing solution is a testament to TransUnion’s focus on developing innovative solutions that help our customers continue to grow their businesses while protecting themselves from bad actors,” Laky said.