The nation’s leading credit scoring company FICO has created a new credit scoring system aimed specifically for mortgage lenders with the goal to attract more qualified home loan consumers. The new system creates a more complete credit evaluation of a consumer’s risk file to help lenders better manage risk. By combining traditional credit data along with property transactions, borrower data, landlord/tenant reports and other credit information, the idea is that the new scoring will help more people qualify for home loans. The upside? A lender may be pleased that a marginal borrower is keeping up with common life occurrences such as child alimony or spousal support. And of course, previous monthly on-time payments on your rent/mortgage is a positive in the eyes of a lender.Banks still tend to be interested only in the traditional indicators of the credit report.It’s not for certain yet whether this new scoring system is to qualify more people for mortgages or simply another tool to pick apart one’s credit history. With a more predictive future based on the consumer’s credit history, the average Joe with a marginal score of 680 was able to bump it up slightly. In some cases it went much higher, thereby qualifying the consumer for a lower interest rate or even a mortgage at all. Currently, the average FICO score loan in the second quarter was 757. Just under 10% of this population would score even higher with the new system. Roughly 3% of borrowers would score above 714. With this new information, a positive is the result as negative credit information is absent.This is not yet approved by Freddie Mac or Fannie Mae. About 25 lenders use this new scoring system for approving private lending and for their own use. It is predicted there will be widespread use of this product in the coming months.
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