Choosing between single or multiple credit bureaus: How do lenders decide

The lending universe heavily relies on credit data in assessing an individual's creditworthiness. This information is collected and analysed by CRAs, like Equifax, TransUnion, and Experian, generating credit scores that guide lenders in their decision-making process.

Nevertheless, a critical choice confronts lenders: should they depend on a single credit bureau, or should they adopt a multi-bureau approach?

In this post, we will explore the factors that influence lenders' choices and shed light on the single bureau vs. multi-bureau debate.

Single or multi-bureau: Key factors that influence lenders 

There are several key factors that influence lenders' decision on whether to use a single or multi-bureau approach.

1. Comprehensive data

The first and most common reason that lenders decide on a multi bureau approach is because not all bureaux have the same information. In fact, The FCA’s recent Credit Information Market Study highlighted that:

“There are significant differences in the credit information held by the 3 large CRAs; information that is particularly important to a lending decision.”

Therefore, by using a multi-bureau approach, lenders can access a more comprehensive and  complete picture of a borrower's credit history.

2. Cost and convenience

Another factor that affects the choice between single bureau and multi-bureau approaches is cost and convenience. Accessing credit reports from multiple bureaux is often thought to be more expensive and time-consuming compared to obtaining reports from a single bureau. 

However, most are unaware that by using a multi-bureau approach, they can improve flexibility and save costs. So if you are looking to build a multi-bureau approach into contracts, ask for ‘stepped pricing’ or pricing for primary and secondary, based on lower and higher volumes – This helps you to ensure cost efficiencies, like in the case study at the end. 

3. Data consistency and accuracy 

Lenders value the depth and reliability of credit data when assessing an applicant's creditworthiness. Typically, lenders may resort to a secondary bureau when the applicant's credit score is borderline, there's insufficient data, or the address doesn't match with the bureau's records.

In these cases, leveraging data from multiple bureaux can help lenders gain a more nuanced view of the applicant's credit history. This could help identify discrepancies or inconsistencies that might impact the lending decision. For instance, one bureau might report a County Court Judgment (CCJ) that's not matched to an address, which another bureau might not have.

In summary, a multi-bureau approach can help ensure data augmentation and provide lenders with a more comprehensive understanding of an applicant's credit history, while also offering alternative sources of data when certain issues or complexities arise.

4. Risk management

Mitigating risk is a top priority for lenders. That’s why some lenders use a multi-bureau approach to gain a broader perspective on an applicant's creditworthiness. 

Examining credit data from different bureaux on some applications allows lenders to assess an applicant's financial behavior, payment history, and credit utilisation from multiple angles. This comprehensive view enables a more informed risk assessment and reduces reliance on a single bureau's data, which could potentially be incomplete or outdated.

5. Regional and sector considerations

Additionally, lenders operating in specific regions or markets may have preferences for certain credit bureaux due to dominance or better coverage in those areas. So they may choose to rely on a single bureau that is widely recognised and trusted within their target market. 

That’s why regional and sector considerations play a crucial role in determining which bureau(s) lenders will use to access credit information.

6. Competitive advantage 

Finally, in a competitive lending environment, using multiple bureaux can provide an edge because having a primary and secondary bureau keeps prices down. This is because each bureau either wants to remain primary or encourage lenders to choose them as primary not secondary and switch usage. 

On-boarding costs can therefore be kept to a minimum which is good for competitive edge and good for consumer choice as marketing can be widened too.

Now that we have a solid foundation of why lenders choose a single or multi-bureau approach, let’s take a look at a real-life case example. 👇

Case study: How one lender reduced costs through a multi-bureau approach

Recently one of our largest clients put us to the test. We undertook a data benchmarking exercise to help a leading bank that was using one CRA, move to a multi-bureau approach so that it could get a primary and secondary price from their existing supplier.

The result? The existing price was significantly reduced and they gained the flexibility to use a secondary provider, without the cost of the existing provider’s current pricing being raised.

Plus, if they choose to use a secondary provider and drop their volumes by 70%, the existing pricing will still be honoured. And if they choose to utilise the CRA as their primary data provider, they will receive a 30% discount.

Bonus result: Going through this process led to an alternative provider subsequently quoting and matching the primary pricing for secondary use. So now the client has great flexibility on volumes and price and can decide whether or not they multi bureau.

Making the right choice

As we’ve just seen, the decision of whether to use a single bureau or a multi-bureau approach in credit assessment involves careful consideration of data comprehensiveness, data consistency, risk management, regional and sector factors, and regulatory requirements. 

Interestingly when it comes to cost, we often find there is only a limited increase in cost in overlapping usage. Apart from the initial cost for setup/technology, which can be further reduced especially if a third party decision system is chosen away from the bureaux and the bureaux are used for data and searches only – rather than scores and decisions. 

In fact, we often find that third party hosted platforms are very flexible and agnostic and able to connect easily to all Bureau data as well as making future changes easily.

The bottom line: By undertaking data benchmarking, lenders can make informed decisions on bureau selection, and improve risk assessment strategies that benefit both borrowers and lenders. And save significant costs.