Are ITINs riskier than SSNs in Credit Card and Auto Lending? No.

In 2023, the CFPB and DOJ issued a joint statement reminding financial institutions that all credit applicants are protected from discrimination, citing reports of consumers being rejected due to their immigration status. As a result, financial institutions have looked to expand their decisioning to include underwriting of applications using ITINs, in addition to SSNs.

This renewed focus on ITINs raises the question: are credit applications with ITINs riskier than applications with SSNs? SentiLink analyzed this question using credit performance data from 2021 to track the delinquency rate – payments that are past due by 30 days or more, or have bankruptcy statuses – for applicants either using an ITIN or SSN for the same vintages.

The short answer? Credit applications with ITINs appear to be less risky than applications with SSNs. But before we dig into the details, a quick review:

What are ITINs and who uses them?

Individual Taxpayer Identification Numbers (ITINs) are unique nine-digit identification numbers. They are issued by the IRS to non-citizens filing taxes in the US who either don't yet have or are not eligible for a Social Security Number (SSN).

ITINs are typically used by immigrants, and officially they are only meant to be used for tax filing. However, they are formatted similarly to SSNs, and are often used on credit applications and other forms that require the applicant to enter a nine-digit identification number. 

SSNs vs. ITINs

Use of ITINs in credit applications is relatively rare. The ITIN-using population represents about 0.33% of all applicants seen by SentiLink.

But for organizations assessing credit applications, ITINs can present some unique challenges. For example, services such as eCBSV do not operate on ITINs, making it tougher to validate thin-file name, DOB, and ITIN combinations.

However, this challenge does not mean that ITINs are inherently risky. To investigate the risk associated with this population, we analyzed the performance of ITIN holders based on 2021 data from those financial institutions that do approve applications with ITINs. Specifically, we looked at the performance of credit card and auto lending applications for both populations, overall and filtered by VantageScore for applicants in the 600-700 score band. 

The risk of bad payments in credit card lending

In the context of credit cards, we found that applicants with ITINs actually outperformed applicants with SSNs over the period we investigated (one year from account opening for accounts opened in 2021). 

As we can see, ITIN applicants over this period missed payments at a lower rate than SSN applicants. 

When we filtered the sample specifically for applicants in the 600-700 VantageScore band to control for credit scores, the result was the same: applicants using ITINs outperformed applicants using SSNs over the twelve-month period:

The risk of bad payments in auto lending

In auto lending, the results were similar. Overall, ITIN applicants outperformed SSN applicants, missing fewer payments over the 12-month window. 

When we filtered for just applicants with a VantageScore between 600 and 700, we did not see evidence that ITIN applicants are riskier than SSN applicants, although it's worth noting that because of the smaller overall number of auto applications and relative rarity of ITIN applicants in general, the ITIN sample size for this score band was small.

Conclusion

While some FIs are hesitant to lend to consumers applying with ITINs, our analysis suggests that this population is less risky than consumers applying with SSNs. 

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