What is Secondary Use?
Secondary Use refers to the process whereby a credit report is ordered by one lending entity and then forwarded to one or more additional entities as part of the lending process.
The three national credit bureaus (Equifax, Experian, and TransUnion) now require that all credit reporting agencies comply with specific procedures to track and report Secondary Use of consumer data by lenders. These Secondary Use Inquires (SUI) policies were designed to address consumer privacy rights, Fair Credit Reporting Act (FCRA) compliance, and data security issues.
Examples of Secondary Use:
- Mortgage brokers who order a credit report and then deliver a copy of that report to a wholesale lender
- Lenders who order a credit report and then request a copy of that report be sent to Desktop Underwriter or LP.com
Why was the Secondary Use policy created?
The three national credit bureaus – Equifax, Experian, and TransUnion – created these policies to address issues regarding FCRA compliance, data security, and data accuracy as well as providing consumers with a means to know which entities are reviewing their personal credit data.
Will this replace my re-issue fees from the Government Sponsored Enterprises (GSEs) and other automated underwriting systems?
No, the Secondary Use fee is in addition to your standard reissue fees.
Is there a way to avoid multiple Secondary Use charges if I send a credit report to different lenders?
If you are submitting a consumer’s file to multiple lenders you cannot avoid multiple Secondary Use charges. The process requires that each lender be recognized as a Secondary User via the soft inquiry process, meaning that you will be charged for each instance of secondary use.
What are some situations where a Secondary Use Fee will be charged?
- First Scenario – A credit report is reissued to lenders with access to Fannie Mae or Freddie Mac. The GSEs will report each lender who receives the credit report as a Secondary User. You will be billed a Secondary Use fee for each of the secondary users.
- Second Scenario – A credit report is sent to multiple lenders based upon the underwriting criteria for each lender through a multi-lender platform to qualify a consumer for multiple loan options. In this situation, the primary broker is the End User. Each lender that receives the credit report will be posted as a Secondary User. You will be billed a Secondary Use fee for each of the secondary users.
- Third Scenario – A Secondary User requests a copy of the original credit report. An example would be when a lender with a reference number requests a credit report through Birchwood that was previously issued to a mortgage broker. In this case the credit bureaus will post a soft inquiry for the Secondary User and you will be billed a Secondary Use fee.