New Credit Scoring Might Help Purchase of Home

Posted November 17, 2018 in Real Estate Trends

Michael Pattullo2018, Clark County WA real estate agent

There’s a new kind of credit scoring coming in 2019 that might help more people to buy a home!

The Fair Isaac Corp. or the creator of the FICO score that we all know in association with credit scoring and credit reporting is creating an UltraFICO Score which may help boost mortgage loan approvals. The move by the creators of FICO says that they will update scores by calculating how persons use cash kept in checking, savings and other money market accounts.

By design, the expectation is that it will increase approvals of mortgage loans because it will account for the borrower’s use of cash transactions. The idea is that using cash for small purchases shows a better likelihood to repay a loan. The borrower will be required to agree to share added personal information from checking, savings and other money-related accounts. The information will give the credit scoring agencies an opportunity to score on something beyond credit payment history.

The Fair Isaac Corp. estimates that 79 million Americans who have weak credit or limited credit will be helped by this new scoring option. Because lending companies utilize the scores to evaluate creditworthiness, this potentially gives more borrowers an opportunity for a mortgage without utilizing credit to gain an opportunity to buy a home.

The initial credit scoring opportunity of the UltraFICO will be tested by chosen lenders and others in early 2019. Since borrowers typically have very little control over items found in their credit file beyond contesting information, this gives more options. One option will allow a recalculation incorporating bank account information. An additional option allows the borrower to select which accounts it would like to incorporate into the recalculation.

This is good news for our community because it gives an opportunity for affordable housing options for those who would otherwise not be considered for home ownership. FICO indicated that keeping a banking balance of $400 on average without any overdrafts in the last three months will provide a better score by creating FICO scores with banking information.

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Michael Pattullo
Peak Mortgage
Mortgage Advisor • MLO# 229675 •