Will The New Credit Score System Help You Get A Mortgage?
A client of mine recently questioned why the FICO scores I get are different from a site they use, Credit Karma, when both are using info from the same credit bureaus. Credit Karma’s site explains that there are different scoring models. The scoring-model Credit Karma uses is different from the ones used in the mortgage industry. But proposed legislation may change the scoring-system used by Fannie Mae & Freddie Mac…
A new bill in Congress could significantly impact your ability to secure a mortgage by changing the way lenders look at credit scores.
In December 2015, two members of the U.S. House of Representatives introduced a new bill. Known as H.R. 4211, or the Credit Score Competition Act, the bill is in its first stage of the legislative process. Although it’s a long way from becoming a law (and your eyes may have glazed over at all that legislative jargon), future homebuyers have good reason to keep an eye on this bill. Proponents say it should help a number of first-time homebuyers compete in the real estate market.
That’s because the bill would push for a new credit-scoring system, one that could potentially allow more buyers to secure funding (and be more competitive in the Portland, OR, real estate market and other challenging markets). But how much will it really help your credit-score rating — and how quickly?
What is the Credit Score Competition Act?
H.R. 4211 is a bipartisan bill introduced by Ed Royce (R-CA) and Terri Sewell (D-AL). The bill would impact the Federal National Mortgage Association Charter Act. The core of the bill would require government-backed mortgage institutions — meaning Fannie Mae and Freddie Mac — to use credit scores in the underwriting process of residential home loans “only under certain conditions,” which would include making the process used to validate and approve credit scores publicly available. According to the representatives who introduced the Credit Score Competition Act, this means that Fannie Mae and Freddie Mac could go beyond using the FICO credit-scoring model and use other systems, which is a big deal for those who have a low FICO credit score but are otherwise good home-loan candidates. – See more at: http://www.trulia.com/blog/new-credit-score-rating-system/?ecampaign=con_cnews_digest&eurl=www.trulia.com%2Fblog%2Fnew-credit-score-rating-system%2F#sthash.VmMEkqb1.dpuf