FICO Mortgage Score — What You Need to Know

Obtaining a mortgage is no easy feat in today’s market. While sale prices are down, borrower qualifications have become more restrictive than ever thanks to the housing bubble and its effects on the economy. Banks have become weary of handing out home financing to any person with an open hand. While you may not fall into this category, a steady income and down payment are no longer the sole qualifiers that guarantee a mortgage. This discrepancy has left many would-be homebuyers in a frustrating limbo mode, asking, “Why can’t I buy a house?” –Fortunately, a few financial giants are working to fix the problem. In partnership with CoreLogic, the Fair Isaac Corporation (FICO) has created the FICO Mortgage Score, a new way to measure creditworthiness and mortgage qualifications.

How is a FICO Mortgage Score different from a regular credit score?

The keyword for the new Mortgage Score is “targeted.” According to FICO, the new mortgage scoring model is 7.5 percent more predictive than the regular FICO score when it comes to home financing. The reason? They now incorporate metrics and risk identifiers that are not measured in a traditional score. Factors such as rent payments, public records, and utility bills are included to assess creditworthiness and gauge risk.

How will this change affect my score?

While you may be worried about the impact of new scoring factors, don’t give up just yet. An article in Time revealed that over 70 percent of polled consumers saw an increase in their credit score, a huge win for borrowers who are trying to secure financing. Although the stats predict a change in your favor, it’s more important than ever to keep your bill payments in check. Practice preemptive credit repair by paying rent on time and staying current on utility bills. The new scoring model was designed to promote accuracy and fairness; why not benefit from FICO and CoreLogic’s good graces?

Is mortgage approval guaranteed with the new score?

The FICO Mortgage Score was developed to promote accurate scoring and protect lenders from future risk. While the new scores could open the door for thousands of new mortgage deals, there is no guarantee that banks will breach the threshold. Many lenders remain wary of approving mortgages to applicants without stellar credit (720+) and a 20 percent down payment. The effectiveness of the new scoring model is being tested by over 20 big-name banks, offering hope of a calmer lending environment in the future. Whatever the outcome, keep general credit repair on your to-do list. A clean slate means clean credit across the board.