Lenders Want More Credit Information

Fair Isaac Corp., or FICO, the company behind our credit scoring system has announced that beginning next year lenders will be requiring more information than ever before from those applying for loans.  A separate score that will include pay day loans, evictions and over due child support payments will be provided to mortgage lenders through Fair Isaac Corp. who will be working in collaboration with data provider Core Logic.

These new rules come at a time when housing prices are at all time lows and predicted to go lower and very few can meet the requirements already in place.  Most Americans have felt the pinch of the recent economic downturn that forced many from their homes and left others holding mortgages that showed they owed much more on their homes than their homes were now actually worth.

This has caused many to see a drop in their credit score due to missed payments on an under water mortgage and in some cases defaulting on other loans due to loss of income because the unemployment rate is now above 9% with some states reporting unemployment above 11%.

Other reports are indicating that this trend of requiring more information will continue when in the future lenders will begin to ask for information on the status of cell phone payments, rent delays and utility payments. Earlier this year Experian began including data on on-time rental payments in its reports.

Some consumers could benefit from the new requirement because they have had little information in the past included in their credit scoring file.  This would help bulk up those files with on time payments and boosted credit scores while others could see a drop in their credit score when late payments are shown from smaller groups that have never given data before like pay day loans and cell phone carriers.

Some have criticized this new step saying it unfairly targets those who have been caught in a bad debt loop like those using payday loans.  “Payday loans are extremely onerous,” said Chi Chi Wu, a staff attorney at the National Consumer Law Center. “They trap people in a cycle of debt. To report on them is to cite that person as financially distressed. We certainly don’t think that’s going to help people with a credit score.”

Those in support of the new requirements say that this information will help lenders see what any given consumer can afford and in turn work with that consumer toward the best lending approach in order to avoid the mistakes of the past.

The FICO/CoreLogic partnership won’t result in a credit score that will rule out a borrower for a mortgage backed by Fannie Mae, Freddie Mac or the FHA, which together own or guarantee at least 90 percent of the mortgages being written.  This is because these agencies rely on the “tri-merge” report which does not include Core Logic data.

Related posts:

  1. Fannie and Freddie Planning to Aide Lenders
  2. California Legislation Tightens Restrictions On Lenders
  3. Permanent Loan Modifications Difficult To Achieve
  4. Tax Credit Helps Homes Sales Increase

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