Your Mortgage and Trended Data Credit Reports
The phrase trended credit data may not mean much to you now. But if you’re shopping for a home loan anytime soon, it will.
Also referred to as historical, longitudinal or time-series data, it basically means that credit underwriters will be looking at a lot more information when they scrutinize your credit profile.
Are you making the minimum payments on your credit cards each month? Or do you pay the balance in full?
Do you pay your accounts well before the due date? Or do you wait until just before the last day the payment is due?
Are your credit balances always near the limit? Or are you consistently paying them down, reducing your credit utilization over time?
With trended data, lenders will see all of this.
Who will this affect? Well, if you’re planning to apply for a conventional mortgage, it affects you. Conventional loans must conform to Fannie Mae guidelines—and Fannie Mae has announced that it will begin using trended data in its Desktop Underwriting (DU) program. That’s the software that lenders use to qualify borrowers for conventional loans.
Will this new approach help you as a consumer? There’s a good chance the answer is no. The lending industry is trying to put a positive spin on it, saying it will help consumers as well as lenders. TransUnion is one of the companies promoting trended data. Here’s how they put it:
TransUnion research indicates that the percentage of consumers in the Super Prime risk tier, who generally have the greatest access to new loans at the lowest pricing, would increase from 12% of the population to nearly 21%.
So for those with excellent payment habits, it could help. For those who are struggling to stay current—not so much.
Another important question: Will the people working on your mortgage really understand what all this data means? And how will they handle it? That will depend a lot on Fannie Mae’s guidelines for it—which haven’t been issued yet.
Keep in mind that, as of now, the trended data will not change your credit scores. That includes normal FICO credit scores and the ones used in mortgage lending. So, if you had a 700 score without trended data, you’ll still have a 700 score with it.
But that could change. Will FICO or Vantage change or modify the scoring models? I see that as probably forthcoming, as well as Fannie Mae updating its assessment of credit risks.
When will all this happen? Fannie Mae is targeting the beginning of July 2016 to implement this information into its Desktop Underwriting platform.
I’ll keep you posted with updates as they become available.