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Yo! Are you ready for the new improved credit reports providing you with trends in a consumer’s debt repayment history? You better be, because as of September 24th, Fannie requires that all loans submitted through DU must have this additional credit information.
Whether you want the trending data or not, you’re going to get and pay for it in your new credit reports. Equifax and Trans Union are already reporting the trends. Experian may join the fray at some point in the near future.
The new information will include at least a 24-month history, if available, for all debts, providing the amount due monthly, what is paid, when paid, along with consumer and creditor information presently being reported.
The trending information is in addition to the existing FICO score data. That will remain the same.
The key elements of new info will place consumers into two main categories of credit users.
- The Transactor who pays off their revolving debt balances in full each month, or
- The Revolver who pays either a minimum payment due or something less than the full balance, for their revolving debts monthly.
Hey, what about someone who pays some of their revolving debt in full and some at the minimum? Are they a Transvolver or a Reactor?
As you might think the Transactor will be viewed as a better credit risk. So, it is possible that you can have two applicants with the same credit score and similar outstanding debt with one getting approved (Transactor) while the other (Revolver) is declined by DU. It all comes down to the perception of risk and what’s loaded in the black box.
For now, a lender need not consider the new trended data when underwriting a loan manually or if you are not submitting it through DU. Neither FHA, VA nor Freddie are using the new data (yet). It is only used by loans going through DU. If you use the DU approval for sale and delivery of loans to other secondary market sources or investors, this data will come into play.
This means you may have a loan within an acceptable FICO range for approval under a certain loan program that gets declined by DU because of the trended data. Fannie believes there will be minimal changes in the number of loans approved and declined. They say the trended data will result in more marginal borrowers getting approved for home financing. That would be a good thing for consumers and lenders alike. Let’s all hope so.
So, get set to follow a new trend in credit reporting. One that is not so different than what was done years ago, long before credit scores. The big difference is the credit information will now be examined and evaluated by a machine instead of human being.
Welcome to the future. The game has changed. Play different.
