When a mortgage loan application is filed, the lender gives a lot of importance to the applicant’s credit score. But that may change in the future. FICO (Fair Isaac Corporation), the credit scoring giant, has recently unveiled a new credit score created specifically for mortgage lenders. This new mortgage credit score is said to offer a more comprehensive view of your spending behaviour.
What Is the New Mortgage Credit Score?
The FICO Mortgage Credit Score, powered by CoreLogic, is a credit score and report that will have more information than that currently offered by other credit agencies, such as Experian, Equifax, and TransUnion. This additional information will be extremely detailed and offer a more comprehensive view of your finances and spending habits.
Will It Replace the Current Credit Score?
In the future, it may, but it is too early to tell, since the new score also has its share of negatives. For now, it is intended as another tool to help the mortgage lender make a decision on your application. The additional data will allow the lender to get a better understanding of you as an applicant.
Positives of the New Mortgage Credit Score
According to its supporters, the new score will help more people get their loans approved. It allows the lender to get a better and fuller understanding of you as a borrower. A few positives of this new score:
- It helps people with no credit history. Some people who are so prudent with their finances that they have never used credit, and thus have no credit history. While this is a good thing, it makes getting a mortgage loan in the Greater Boston Area harder. The lender has no data to show the credit-worthiness of the applicant. In such a scenario, the new credit score will be useful, since it will show if the person has made payments exactly on time every time.
- It shows the lender’s good behaviour. If you have made the payments on your car loan or a short-term loan like clockwork, this data will be in the new credit score. This will show your “good behaviour” to the lender.
Negatives of the New Mortgage Credit Score
- Mistakes: The accuracy of the data in these reports is a major concern. While CoreLogic, the company behind the data, have been in the business for a long time and are experienced players, mistakes might occur. The best way to counter this is to get a report for yourself (one free copy for every citizen each year), check it for mistakes, and report any needed changes.
- Ability to Make Changes: It is yet to be seen if the system in place to dispute and make changes to the data is quick and efficient.
- Hurts the Lower End of the Spectrum: This new report will contain everything. If you could not make rent or if you were evicted from your home, it will be present in the report. Considering that the past few years have been hard, chances of having a black mark on the report are higher, making loan approval tougher.
As you can see, there are a number of positives and negatives to the new FICO mortgage credit score. But only time can show the usefulness of the new score.