What is Secondary Use?
Secondary Use as it relates to the mortgage lending industry is the term used by the major credit repositories (Equifax, Experian and TransUnion) for the process in which a consumer credit report (or any portion thereof) is provided to another third party business entity or individual as part of the lending process. Due to recently heightened initiatives to increase protection of consumer credit information and combat identity theft, the major credit repositories now require all mortgage credit reporting agencies to comply with newly implemented procedures geared toward the tracking and reporting of all secondary uses of consumer credit data by third parties such as lenders.
Why have Secondary Use Policies been Implemented?
As mentioned above, the major credit repositories have recently increased their overall initiatives toward the safeguarding of consumer credit data and have created these policies to ensure maximum accountability for data security and to provide all consumers with a more accurate list of the entities that have accessed their credit information.
When Does Secondary Use Occur?
The secondary use of consumer credit data occurs when the originating end user (lender or broker) provides the consumer credit report, or any portion thereof, to a third party business entity or person (typically a sponsoring lender). The following are two examples of when secondary use would occur:
- A mortgage broker orders a consumer credit report from SettlementOne and then transmits a copy of that report, or any portion thereof, to a lender via an electronic reissue.
Does Secondary Use Lower My Borrower’s Credit Score?
No. The reissue of a consumer credit report to a lender only effectively transmits the report data to the lender, so the consumer’s credit report is not re-accessed by the receiving party. In addition, all secondary use inquiries are considered to be “soft” inquiries which by nature do not affect the consumer’s score.
Is Secondary Use Charged by all Credit Reporting Agencies?
The requirement to track, identify and properly report all secondary uses of consumer credit data to the major credit repositories is shared amongst all credit reporting agencies of consumer credit data. As a result, all credit reporting agencies are likely to pass this cost along to their end users.
SettlementOne Secondary Use Policy
To further aid the major credit repositories’ efforts to ensure compliance with the requirements of the Fair Credit Reporting Act and provide consumers with a more accurate list of the entities that have accessed their credit information, SettlementOne has developed certain policies and procedures relating to the secondary use of consumer credit data by its end users.
All secondary uses of consumer credit data must be prepared within the course of the same mortgage loan application and the same permissible purpose as the originating credit inquiry. End users are not permitted under any circumstances to resell or otherwise release the consumer credit information provided by SettlementOne to any other third-party business, entity or individual outside of the mortgage loan application process and permissible purpose of the originating credit inquiry. All secondary uses of consumer credit data by SettlementOne’s end users must be completed directly or via an electronic connectivity portal. SettlementOne is required to track, identify and properly report all secondary uses of the consumer credit data disseminated to its end users to each of the corresponding credit repositories.