WHITE PAPER Enhanced Public Record Standards July 2017 As industry and consumer needs evolve, TransUnion and the other nationwide Credit Reporting Agencies (CRAs) continually seek ways to ensure the data we maintain on our consumer credit files are accurate and timely, to best serve the needs of our customers and consumers. As such, the CRAs have established enhanced public record data standards and service levels for the collection and timely updating of civil judgments, tax liens and bankruptcy public records supplied by our public record vendor. The focus was on: (i) minimum required consumer identifying information (name, address, social security number and/or date of birth) ( PII ) and (ii) minimum frequency of courthouse visits to obtain newly filed and updated public records (no less frequent than once every 90 days). These enhanced Public Record standards will apply to new and existing bankruptcies, tax liens and civil judgment data in our respective credit reporting databases. At this time, we continue to work with our public records vendor to refine the requirements and service level expectations in a manner to ensure adherence, but still address the challenges and variances at the data sources themselves. These challenges include varying PII availability on original record documents, differences in automation and electronic docket availability from court to court, variances in courthouse and recorder s office accessibility to collectors, and dissimilar timeframes for making public record updates available at the point of collection.
Executive Summary While final details cannot be provided until after the enhanced standards go into effect (July 2017), based on our current analysis of public record data on our credit reporting database we anticipate the following: No change to bankruptcy public record data Significant change to civil judgment public record data such that we will be removing all civil judgment public record data Significant change to tax lien public record data such that we will be removing a minimum of 60% of tax lien public record data Data changes and impacts associated with the enhanced collection frequency requirements cannot be known until after the enhanced standards go into effect Based on these anticipated public record data changes, TransUnion s internal analysis of their likely impact on its credit reporting data base reveals the following: Approximately 9% of the population has either a tax lien or a civil judgment reported on their file, which may result in a credit score impact The impact across eight TransUnion generic scores tested is expected to be modest. Any score shifts are anticipated to range between 2.5% and 6.4% with most scores increasing. There is no loss in the predictive performance of the scores tested since they capture other derogatory-type behavior Sample Design In order to gauge the anticipated impact of the enhanced data standards on our consumer reporting database, a random sample of 10M consumers was tested using the following methodology: 1. Score 10M population for June 2016 archive (Before file) 2. Remove public record information if the following conditions are met: Tax Liens 1 with no SSN present All Civil Judgments 2 3. Re-score 10M population for June 2016 archive (After file) 4. Produce before and after score reports: TrueRisk Auto Insurance Score 2 2016 TransUnion LLC All Rights Reserved 16-96186
TrueRisk Property Insurance Score CreditVision Auto Insurance Score TrueRisk Life Score Based on the random 10M sample, more than 9M or 91.35% of the consumers do not have either a tax lien or a civil judgment; therefore these consumers will not be impacted by the new reporting standards and will not experience any score shift as a result of the enhanced data standards for public records. Consumers with tax liens or civil judgments 91.35% 2.90% 5.16% 0.59% Consumers with no tax liens or civil judgments Consumers with 1 or more tax liens Consumers with 1 or more civil judgment Consumers with both (at least 1 tax lien and at least 1 civil judgment) As stated above, all civil judgments will be removed, whereas roughly half of the tax liens will be removed. In both cases of the affected population, the majority of the consumers have just one tax lien or one civil judgment. Distribution of tax liens Distribution of civil judgments 67.11% 71.72% 17.47% 6.84% 3.41% 5.17% 16.80% 5.95% 2.61% 2.91% 1 2 3 4 5 or more 1 2 3 4 5 or more 3 2016 TransUnion LLC All Rights Reserved 16-96186
For the affected population of 8.65%, those consumers who will have a tax lien or a civil judgment removed, will see an average score increase between +7 points and +50 points, depending on the score. Score Impacted Population Size Impacted Population Average Point Increase/ Decrease Definition of Performance TrueRisk Auto Score 5.09% 7 High likelihood of auto insurance loss. TrueRisk Property Score 4.21% 50 High likelihood of property insurance loss. CreditVision Insurance Auto Risk Score 4.38% 9 High likelihood of auto insurance loss. TrueRisk Life Score 2.69% -10 High mortality rate. Impact Analysis Results In comparing scores from the before and after files, the four analyzed scores will shift modestly between 2% and 6%. (Note: For TrueRisk Life, a high score is bad and a low score is good, whereas the other scores define a high score as good and a low score as bad. This is why TrueRisk Life has score decreases and the others have score increases). June 2016 Score No Change Score Decrease -41+ -40 to -21-20 to -11-10 to -6-5 to -1 Decrease TrueRisk Auto Score 94.91% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% TrueRisk Property Score 95.79% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% CreditVision Insurance Auto Risk Score 95.62% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% TrueRisk Life Score 97.31% 0.17% 0.01% 0.35% 0.50% 1.66% 2.69% Score Increase 1 to 5 6 to10 11 to 20 21 to 40 41+ Increase 2.27% 1.90% 0.73% 0.17% 0.02% 5.09% 0.12% 0.16% 0.51% 0.99% 2.43% 4.21% 2.69% 0.69% 0.13% 0.80% 0.06% 4.38% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Further, the following tables provide the impact for each of the four TransUnion Insurance generic scores by score band. 4 2016 TransUnion LLC All Rights Reserved 16-96186
TrueRisk Auto Score June 2016 Score Range % No Change Score Increase 1 to 5 6 to10 11 to 20 21 to 40 41+ Increase No Score 7.01% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 100% <= 350 5.73% 90.95% 8.64% 0.35% 0.06% 0.00% 0.00% 9.05% 100% 351-400 4.35% 86.84% 10.20% 2.16% 0.69% 0.10% 0.00% 13.16% 100% 401-450 5.15% 88.09% 8.24% 2.26% 1.13% 0.26% 0.02% 11.91% 100% 451-500 5.74% 88.79% 5.30% 3.39% 1.96% 0.50% 0.05% 11.21% 100% 501-550 6.13% 89.38% 1.55% 6.19% 2.31% 0.50% 0.07% 10.62% 100% 551-600 7.12% 91.13% 0.95% 5.43% 1.97% 0.46% 0.07% 8.87% 100% 601-650 9.37% 94.07% 0.65% 3.70% 1.26% 0.28% 0.05% 5.93% 100% 651-700 9.40% 95.51% 0.71% 2.68% 0.87% 0.19% 0.03% 4.49% 100% 701-750 11.42% 97.60% 1.32% 0.70% 0.29% 0.08% 0.01% 2.40% 100% 751-800 16.52% 99.01% 0.77% 0.15% 0.06% 0.02% 0.00% 0.99% 100% 801-850 11.75% 99.61% 0.32% 0.04% 0.02% 0.00% 0.00% 0.39% 100% 851+ 0.30% 99.85% 0.02% 0.13% 0.00% 0.00% 0.00% 0.15% 100% 100.00% 94.91% 2.27% 1.90% 0.73% 0.17% 0.02% 5.09% 100% 5 2016 TransUnion LLC All Rights Reserved 16-96186
TrueRisk Property Score June 2016 Score Range % No Change Score Increase 1 to 5 6 to 10 11 to 20 21 to 40 41 to 60 61 to 80 81 to 100 101+ Increase No Score 7.00% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 100% <= 350 3.05% 62.34% 2.40% 3.61% 11.45% 18.12% 2.01% 0.07% 0.00% 0.00% 37.66% 100% 351-400 5.20% 80.95% 0.26% 0.63% 1.17% 5.18% 9.46% 1.94% 0.37% 0.04% 19.05% 100% 401-450 5.39% 87.15% 0.21% 0.15% 1.11% 0.41% 2.87% 6.05% 1.57% 0.48% 12.85% 100% 451-500 5.33% 91.13% 0.16% 0.04% 0.37% 0.80% 0.11% 5.79% 0.80% 0.79% 8.87% 100% 501-550 8.30% 95.56% 0.07% 0.02% 0.06% 0.59% 0.04% 1.27% 1.63% 0.76% 4.44% 100% 551-600 7.00% 96.50% 0.07% 0.02% 0.07% 0.39% 0.03% 0.17% 2.31% 0.45% 3.50% 100% 601-650 14.03% 98.96% 0.02% 0.01% 0.02% 0.12% 0.01% 0.68% 0.09% 0.09% 1.04% 100% 651-700 10.08% 99.01% 0.02% 0.01% 0.03% 0.06% 0.00% 0.75% 0.10% 0.02% 0.99% 100% 701-750 16.00% 99.77% 0.01% 0.00% 0.02% 0.00% 0.07% 0.11% 0.01% 0.00% 0.23% 100% 751-800 15.48% 99.94% 0.00% 0.00% 0.00% 0.00% 0.04% 0.00% 0.00% 0.00% 0.06% 100% 801-850 3.14% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 100% 100.00% 95.79% 0.12% 0.16% 0.51% 0.99% 0.74% 1.04% 0.47% 0.18% 4.21% 100% 6 2016 TransUnion LLC All Rights Reserved 16-96186
CreditVision Auto Insurance Risk Score June 2016 Score Range % No Change Score Increase 1 to 5 6 to10 11 to 20 21 to 40 41+ Increase No Score 7.83% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 100% <= 350 4.85% 91.33% 8.06% 0.15% 0.33% 0.12% 0.00% 8.67% 100% 351-400 7.12% 91.58% 6.78% 0.55% 0.03% 1.05% 0.01% 8.42% 100% 401-450 5.04% 89.49% 8.23% 1.37% 0.15% 0.69% 0.08% 10.51% 100% 451-500 5.79% 89.85% 6.63% 2.17% 0.30% 0.88% 0.17% 10.15% 100% 501-550 6.50% 91.00% 4.92% 2.31% 0.35% 1.13% 0.28% 9.00% 100% 551-600 7.38% 92.75% 3.59% 1.80% 0.29% 1.37% 0.20% 7.25% 100% 601-650 8.52% 94.77% 2.39% 1.09% 0.15% 1.45% 0.14% 5.23% 100% 651-700 9.52% 96.55% 1.46% 0.48% 0.07% 1.42% 0.03% 3.45% 100% 701-750 10.90% 98.15% 0.60% 0.14% 0.02% 1.08% 0.01% 1.85% 100% 751-800 13.11% 99.21% 0.17% 0.04% 0.07% 0.51% 0.00% 0.79% 100% 801-850 10.40% 99.65% 0.05% 0.01% 0.14% 0.14% 0.00% 0.35% 100% 851+ 3.03% 99.89% 0.01% 0.02% 0.07% 0.00% 0.00% 0.11% 100% 100.00% 95.62% 2.69% 0.69% 0.13% 0.80% 0.06% 4.38% 100% 7 2016 TransUnion LLC All Rights Reserved 16-96186
TrueRisk Life Score June 2016 Score Range % No Change -41+ -40 to -21 Score Decrease -20 to -11-10 to -6-5 to -1 Decrease No Score 11.49% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 100% <= 10 11.44% 99.60% 0.00% 0.00% 0.00% 0.00% 0.40% 0.40% 100% 11-20 6.96% 98.83% 0.00% 0.00% 0.00% 0.75% 0.41% 1.17% 100% 21-30 6.35% 98.34% 0.00% 0.07% 0.04% 1.03% 0.52% 1.66% 100% 31-40 6.52% 98.06% 0.00% 0.03% 0.70% 0.43% 0.78% 1.94% 100% 41-50 6.81% 97.62% 0.01% 0.00% 1.26% 0.00% 1.11% 2.38% 100% 51-60 7.07% 97.06% 0.01% 0.00% 1.44% 0.00% 1.49% 2.94% 100% 61-70 7.46% 96.18% 0.04% 0.00% 1.33% 0.39% 2.06% 3.82% 100% 71-80 8.22% 95.10% 0.03% 0.00% 0.17% 1.87% 2.83% 4.90% 100% 81-90 9.80% 94.32% 0.10% 0.00% 0.00% 1.75% 3.83% 5.68% 100% 91-100 17.89% 96.00% 0.85% 0.00% 0.00% 0.02% 3.13% 4.00% 100% 100.00% 97.31% 0.17% 0.01% 0.35% 0.50% 1.66% 2.69% 100% 8 2016 TransUnion LLC All Rights Reserved 16-96186
Example portfolio analysis: Score shift impact on overall rate level Below are two example portfolios, one that uses the TrueRisk Auto Score and the other the TrueRisk Property Score. Rating tier structure, pricing factors, and current customer mix assumptions were made to illustrate the overall rate level impact from the expected score shift on these sample portfolios. To isolate the impact on overall rate level to only the expected score shift, the analysis assumes no changes to insurance score ranges or rating factors. To measure the impact on overall rate level a weighted average rating factor is calculated based on the current and post change customer mix. The percent difference between the post change and current weighted average factors represents the estimated overall rate level impact. It should be noted that these example portfolio analysis could overstate the overall rate level impact as they assume the score shift occurs all at once on the entire portfolio. In reality, the score shift will immediately impact all new business customers written on or after July 2017, and renewal customers only at their next renewal credit reorder on or after July 2017. Additionally, if a rating plan has less than 15 insurance score rating tiers the overall rate level impact would likely be less than the stated examples as the expected score shift would be less likely to move customers between rating tiers. Portfolio analysis based on TrueRisk Auto Score Based on the average score point change of the impacted population of seven points, there is only a minor shift in customer mix between rating tiers. The estimated overall rate level impact on the example portfolio using the TrueRisk Auto Score is -0.1%. Insurance score rating tier Score range Rating factor Customer mix-current Customer mixpost change Percentage point change 1 816-900 0.66 6.79% 6.79% 0.00 2 800-815 0.69 6.55% 6.55% 0.00 3 782-799 0.72 6.82% 6.83% 0.01 4 764-781 0.76 6.54% 6.55% 0.01 5 742-763 0.80 6.69% 6.69% 0.00 6 714-741 0.85 6.81% 6.82% 0.01 7 683-713 0.90 6.60% 6.69% 0.09 8 649-682 0.96 6.65% 6.66% 0.01 9 616-648 1.02 6.61% 6.63% 0.02 10 577-615 1.08 7.27% 7.30% 0.03 11 531-576 1.16 6.08% 6.07% -0.01 12 480-530 1.23 6.59% 6.60% 0.01 13 422-479 1.31 6.67% 6.61% -0.06 14 357-421 1.40 6.65% 6.56% -0.09 15 300-356 1.49 6.66% 6.64% -0.02 WEIGHTED AVERAGE RATING FACTOR Current: 1.0004 Post change: 0.9997 Difference: -0.1% 9 2016 TransUnion LLC All Rights Reserved 16-96186
Portfolio analysis based on TrueRisk Property Score Despite the relatively higher average score point change of the impacted population of 50 points, there is still only a minor shift in customer mix between rating tiers. The estimated overall rate level impact on the example portfolio using the TrueRisk Property Score is -0.6%. Insurance score rating tier Score range Rating factor Customer mix-current Customer mixpost change Percentage point change 1 786-900 0.69 6.79% 6.81% 0.02 2 764-785 0.68 6.81% 6.82% 0.01 3 750-763 0.69 6.97% 7.00% 0.03 4 734-749 0.71 6.45% 6.49% 0.04 5 714-733 0.74 6.62% 6.66% 0.04 6 689-713 0.78 6.60% 6.66% 0.06 7 658-688 0.83 6.58% 6.63% 0.05 8 639-657 0.90 8.09% 8.15% 0.06 9 617-638 0.97 5.29% 5.40% 0.11 10 577-616 1.06 6.58% 6.64% 0.06 11 530-576 1.15 6.69% 6.80% 0.11 12 497-529 1.26 6.60% 6.72% 0.12 13 440-496 1.37 6.70% 6.72% 0.02 14 381-439 1.50 6.66% 6.64% -0.02 15 301-380 1.64 6.63% 5.87% -0.76 WEIGHTED AVERAGE RATING FACTOR Current: 0.9967 Post change: 0.9911 Difference: -0.6% Conclusion As a result of the enhanced public record data standards going into effect July, 2017, TransUnion s internal impact analysis findings demonstrate that the majority of consumers will be unaffected. Of those that will be affected by a removal of tax lien(s), civil judgment(s), or both, they will experience a score shift between 2% and 6%. Based on the example portfolio analysis the expected score shift should have a minor impact on overall rate level. Given the robust design of the models which incorporates other derogatory-type of behavior we anticipate little to no loss in predictive performance of TransUnion s generic models. In the coming months, we expect to, have more details on expected changes, readiness approaches and further insights and suggestions as to how to evaluate these changes for your business needs. Please contact any member of your TU Account Team with questions you may have or forward your question pertaining to this matter to the TU Project Team at TUDAS@transunion.com. 10 2016 TransUnion LLC All Rights Reserved 16-96186