What the Recent Changes in FICO Scoring Mean for Homebuyers
There have been some recent changes to FICO scoring, and the good news is, they can benefit you in the home buying process. First off, your FICO score makes up the bulk of your credit report that lenders use to analyze the credit risk of a particular applicant. Your FICO is typically between 300 and 850 — the higher the number is, the better your score is and the better chance of getting favorable financing rates. The FICO score considers many factors, from payment history to credit types. Anything above 650 means you have good credit and are likely to get a lower interest rate than someone with a score below 620, for example.
Recent changes to the FICO scoring process could make it easier for first-time homebuyers to get favorable financing. In August of 2014, FICO announced an improved method of assessing consumer collection information, which can lead to a more predictive score than in the past, according to FICO. It’s called FICO Score 9, and it’s designed to get around paid collection agency accounts and make a distinction between medical and non-medical accounts, thereby ensuring that medical collections don’t affect your score as much as they have in the past. That’s good news, as the median FICO score for those whose only ding against them is their outstanding medical collections accounts will rise by 25 points. FICO Score 9 provides a more accurate snapshot of the chances of a consumer repaying their debt than other versions have showcased. This new scoring system is being rolled out this fall and into the winter months. Those with limited credit history will also be more protected with this new scoring system. In the past, it’s been difficult to quantify the risk of someone with very little credit history, and the new scoring aims to delve deeper into degrees of risk rather than paint such a stark black and white picture.
Why the Changes?
Using tools like Multiple Goal Scorecard technology, the result is a more balanced approach to risk metrics that have been traditionally used in the evaluation of accounts, taking into consideration a variety of product lines, from mortgages to credit cards. Consistency is the goal here, so that the FICO score will be steady across all the top credit bureaus that provide reports on those who apply for conventional home loan rates. This ability on the part of lenders to become more precise in the analysis of consumers can cut down on the hassle in terms of adoption and compliance.
If you are new to the home buying market, don’t forget to consult the industry experts at Marquee Mortgage At Marquee Mortgage our team of brokers work to find you the best loan possible, creating financial solutions with the customer in mind. No matter what your credit score, Marquee Mortgage will help you find the best loan for your situation. Call us today for a free consultation and let us help you finance the home of your dreams.