What the FHFA Credit Score Change Could Mean for the Industry
Source: National Mortgage News
Mortgage experts generally expect government-related investors' plan to replace FICO's "classic" score with newer ones — and more flexible credit reporting — could open up lending, but some are worried about unintended consequences and costs.
As the Federal Housing Finance Agency noted in announcing the plan, incorporating alternative data in scores and providing more flexible reporting could help more consumers qualify, but some fear it won't help everyone.
Some of the advances in the past decade not incorporated in the nearly 20-year-old classic FICO score or traditional reporting, like trended data, "could be advantageous to people who are working to reestablish credit," said Shmuel Shayowitz, president and chief lending officer of Approved Funding. However, he questioned whether they'll be as much help to younger people who lack payment track records.
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