The Newest Addition to Your Credit Reports – Trended Data

The credit reporting agencies (CRAs) have access to a lot of information about you. Some of that information is included on your credit reports and some of it is not. For example, although public criminal records are available to anyone (the CRAs included) that information is not currently included on your credit reports.

A few years ago the CRAs quietly added some new and very meaningful information to consumer credit reports that is formally referred to as “trended data.” This new information is highly predictive of credit risk, a fact which unsurprisingly has lenders rather intrigued. Because of its predictive power the trended data is likely to become increasingly important to your overall credit health in the years to come. For that reason, it is important to learn about this newer addition to your credit reports and, more importantly, how you can use this knowledge to your advantage.

What Is Trended Data Anyway?

Trended data is sometimes referred to as “time series” data or historical payment data. It is a 24 month chronology of your balances, actual payments made, and credit limits. This information allows any person or any credit scoring system to determine if you’re carrying a balance month to month (revolver) or if you’re paying off your card and simply charging up a new balance (transactor). Prior to the inclusion of trended data on credit reports it was impossible to tell whether you were carrying a balance from one month to the next on a credit card account or whether you had simply paid off your credit card balance and then used it again…not any longer.

Why Should You Care about Trended Data?

You should care about trended data for one very simple reason – it’s very predictive of your credit risk. Remember, lenders rely heavily on your credit scores and credit reports to help predict the risk of doing business with you. If your credit shows that you are less likely to pay back your loans according to the terms of your agreements then a lender may either turn down your application or may charge you more money to do business with you.

As mentioned previously, trended data is highly predictive of credit risk. Studies have actually shown that revolvers pose 3 to 5 times more credit risk than transactors. This means that even if you pay every single one of your credit card payments on time and the rest of your credit is pristine, you still represent a higher risk to lenders if you carry a balance on your credit cards from one month to the next.

Trended data is already being considered on some mortgage loan applications backed by Fannie Mae. Additionally, this VantageScore 4.0 will be the first credit score to consider trended data when it is released in the fall of 2017. It may be some time before lenders adopt a credit score which considers trended data, but when they do then your credit scores could go down if you do not develop the habit of paying off your credit card balances in full each month.

It has always been important to pay off your credit card balances monthly because of the financing costs involved, but it is now more important than ever. Remember, your credit reports now show a 24-month window into your historical credit card payment history. If you wait until lenders actually begin to adopt credit scoring models which consider trended data before you pay off your credit card balances each month then you may have a bit of time to wait before your credit scores can fully recover from this practice. Being proactive about paying off credit card debt now can help you to avoid this problem in the future.