Lenders will soon be able to access information never before made available in financial reports. Data analysis company CoreLogic has already introduced a new type of credit report which takes into account an individual’s rental payment history, evictions, child support judgments, applications for payday loans and payment history on utility and cellphone bills, to name a few sources. CoreLogic has established a partnership with FICO to create a consumer score called CoreScore based on the newly compiled data, to be used specifically by mortgage and home equity lenders.
For some, this new form of credit scoring may illuminate previously overlooked positive attributes, such as paying rent on time. The added information will mainly benefit lenders looking for more information regarding prospective borrowers’ tendencies to pay their debts. Also, CoreScore shortens reporting times from the standard 60- 90 days to 23 days or less, providing lenders with earlier knowledge of considerable borrower financial obligations.
Already connected with major lenders, CoreLogic has an extensive consumer base, with a predicted 100 million Americans soon having a CoreScore credit report. Thus, the implications of the added information are wide-ranging, but can be checked as part of CoreLogic being subject to the Fair Credit Reporting Act. Consumers will have the ability to dispute any incorrect information on CoreLogic’s website.
first tuesday take: CoreLogic’s supplemental credit information will benefit those borrowers with small credit files looking to add to their sparse amounts of consumer data.
Other borrowers, such as those who have strategically defaulted but have a history of paying their bills on time, will be evaluated by lenders, who must decide how to value a high CoreScore coupled with a low FICO score. Either way, borrowers who pay attention to utility and cellphone bills will have an upper hand.
Still, most consumers will find the added figures to be intrusive at the benefit of major lenders, who will now be able to offer worse rates to borrowers with high FICO scores but low CoreScores. With this additional hurdle for people who are to become borrowers, agents and brokers will have to advise their clients of the effects of CoreScore for months and years leading up to buying a home.
Although the way a borrower repays is exceedingly important, stricter underwriting standards would be more beneficial to ensure people can afford housing in a sustainable way.
Traditional scoring methods of mortgage underwriting systems will still be used by Fannie Mae, Freddie Mac and the Federal Housing Administration, which back the majority of mortgages. Thus, the additional credit information will mainly be a lender tool, influencing them to charge more in interest on mortgages based on access to additional consumer flaws. CoreLogic has not yet specified which major lenders will be using the report.
The new score information is intended to boost the number of people buying homes, but it is unlikely that the supplemental score will benefit most borrowers. Unless Fannie Mae and Freddie Mac come up with guidelines to accept CoreLogic’s score, brokers and agents will still refer to traditional methods of credit scoring. For now, simply keeping tabs on the CoreScore will be enough.
Re: “A credit score that tracks you more closely” from the New York Times