You may have heard a loan officer mention the term “Tri-Merge Credit Report: when you are trying to apply for credit to get a mortgage. What exactly does that mean?
A Tri-Merge Credit Report is specifically used by the mortgage industry to identify all three credit scores and credit history from Equifax, TransUnion and Experian, for an individual borrower. A Residential Mortgage Credit Report (RMCR), merges these reports into one easy to read format.
The law says you can request a free annual credit report from each of the three major credit reporting agencies but that is not a tri-merge report.
They must provide your reports to you so long as they can verify your identity. However, that does not mean you will get the credit scores or the scores and reports into one merged report. You will get three separate reports without the scores.
Who Uses A Tri-Merge Credit Report?
When I was a mortgage lender we only used a tri-merge credit report. Mortgage lenders have always used the tri-merge report to evaluate potential borrowers that are looking to secure a home loan. The report gives you all three credit reporting bureaus (TransUnion, Experian and Equifax) reports merged into one simplified report that is easier to read and evaluate someone’s credit.
When you apply for a mortgage loan the lenders will look at all of your credit. Not just one bureau. Applying for a mortgage is different than applying for a consumer loan where they will usually only need to pull one report from one bureau. When you apply for a credit card or consumer loan, lenders will typically pull from only one bureau because the loan amount is so much smaller.
A mortgage banker or lender will purchase a special credit report called a Residential Mortgage Credit Report, which includes all of the credit information available on you from all three credit bureaus. Each borrower, such as a spouse, must have a Tri-Merge credit report when applying for a home mortgage.
Why Is A Tri-Merge Credit Report Used By Mortgage Lenders?
A tri-merge credit report is used by mortgage lenders because it gives them a global view of your credit. It is important for mortgage lenders to be able to examine your credit data in order to make an informed decision when it comes to the risk.
This will probably be the largest loan you will ever take in your life. Lenders will need to be able to accurately assess the risk before they lend. This is so they can protect their interests. This also is to be sure the loan complies with the guidelines set by the lender. There are also many laws that govern mortgage lending and the lending process must comply with those regulations.
Why Are My Scores Different?
Not all credit companies report to all three bureaus. Many companies only report to one or two of the three bureaus which creates different credit scores on each report. When the scores are significantly different across bureaus, it is likely the underlying data in the credit bureaus is different and thus driving that observed score difference.
Just pulling one report is not a complete view of someone’s credit history. This gives the mortgage lender or bank a complete history of how you have used credit in the past.
Understanding How The Three Scores Are Used
I have had several people come into my office who have heard about tri-merge credit reports. They hear this term and think that the bank will take an average of their three FICO® scores. This is not the case.
Lenders will typically take the middle of your three scores. So as an example you have a score from all three bureaus.
- High Score – 740 Equifax
- Middle Score – 711 Experian
- Low Score – 680 TransUnion
711 will be the score that they use to determine your rate, down payment and terms of the loan.
If there are two borrowers then they will use the middle score of the lowest borrower score. If you have a middle score of 711 and your spouse has a middle score of 695, then 695 will be the score used to determine your rate.
How The Information is Merged
What is actually merged on a tri-merge credit report is your history. The information that has been reported to all three bureaus is merged and duplicates are eliminated for easier reading.
This will help the Underwriter and Loan Officer to analyze the data in one seamless report that shows a complete credit history for the borrower.
Let’s say I have an American Express card. American Express, hypothetically, only reports to one bureau, Experian. Then I have a Capital One card and they only report to TransUnion and Equifax. The report will merge these accounts debts, payment info and payment history onto one simple report so the lender does not have to shuffle between three reporting agencies reports.
Where Can I Get A Tri-Merge Credit Report
You will have a difficult time getting a tri-merge credit report from the lender. The mortgage credit reporting agencies typically only sell them to lenders who facilitate mortgage loans.
The only way you can get the report is if your lender or bank is willing to give you a copy of theirs. This is highly unlikely though. Since the lender or bank paid for the report then they have the right to keep it. However, the information they have should not be that different from the free credit report that you can pull. It will just not be merged and there will be no scores.
If you are denied then the lender will have to send you a letter with the reasons you were denied. But remember it will not be specific. It will read something like this.
We were unable to extend your request for credit at this time. Please see the following factors in making our decision.
- Late payments or derogatory credit history
- Insufficient Credit History
- Judgment or court record
There are various factors that can be listed in the letter. Unfortunately, it does not give you the specific accounts they are basing their decision on. Once you receive that letter you will now qualify for a free copy of your credit report from the credit reporting bureaus so you can see the specifics.
If you want to apply for a mortgage in the future, you don’t need to pay to see a tri-merge credit report in order to know where you stand. You will just request an annual free copy of your credit report from the three bureaus to make sure there are no errors or derogatory remarks. Under current regulations, you are entitled to a free credit report one time per year OR if you are denied access to credit.
If you are interested in obtaining your free credit report you can see instructions on how to do this here.