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by G. Steven Bray
Fannie Mae has announced that this summer it’s going to require that lenders start using “trended” credit data to qualify borrowers. What in the world is trended credit data and how will its use affect a homebuyer’s ability to qualify for a mortgage?
Currently, a credit report is a snapshot in time of one’s credit usage. The report shows current account balances, limits, and minimum payments. A trended credit report shows how those amounts have varied over the last two years. Thus, it augments usage with insights into credit habits. Do you pay off your credit cards each month? Do you pay more than the minimum balance? A trended report will reveal these habits.
TransUnion claims credit scores based on trended data will increase the number of what it calls prime and super-prime consumers by more than 3 million. Analysts expect those who pay off their credit card debt every month will see their scores rise. Other winners may include folks whose trended data shows their revolving balances decreasing over time.
While Fannie is clear about the use of trended data, it’s not clear how it’s going to happen. Trended data is being built into the newer credit scoring models, specifically FICO 9. Fannie and Freddie still require lenders’ use of credit scoring models that are generations older than FICO 9.
We can hope that the trended credit data announcement means Fannie is finally going to update its credit model. If it does, it may lead to a larger pool of potential homebuyers. Reports indicate the new models reduce the score penalty for medical collections and do a better job of scoring those who use credit sparingly.