Monday, November 14, 2011
More Personal Information in the Credit Report
Consumers applying for a mortgage will be sharing more of their personal information with lenders next year.
FICO scores have been based on a person's credit history. But now, tools are being developed to help the lending industry dig deeper.
Fair Isaac Corp., and CoreLogic recently announced a joint project that will result in a separate score that will be available to mortgage lenders and will include payday loans, evictions and child support payments. In the future, the status of utility, rent and cellphone payments may also be included.
Experian, Equifax and TransUnion have recently begun providing estimates of consumer income as an option to the credit report. Experian has also begun including data on on-time rental payments in its reports as of this year.
All this new information could have positive or negative impact for consumers: It may open the door to homeownership to some consumers who otherwise lack sufficient credit histories, and it may help more affluent homeowners who show little use of credit.
On the negative side, the extra information could make a borderline borrower look even worse on paper.
The FICO-CoreLogic partnership will not result in a credit score that will eliminate a borrower for a mortgage backed by FNMA, FHLMC or FHA. This is because the report required for such a loan does not rely on the additional CoreLogic data. It could affect mortgage fees or interest rates charged by lenders who use a risk-based pricing model.This model rewards the most creditworthy borrowers with low rates and tack extra fees onto loans for those with lower credit scores.
It will be interesting to see if the new information will actually expand the number of people who can get a mortgage.