TThe Federal Housing Finance Agency has announced that it will begin asking mortgage lenders in United State To include VantageScore credit scores when they evaluate potential borrowers.
This means that millions of Americans could benefit from this change in lender credit scoring forms, as lenders will incorporate a new version of their FICO score for the first time in nearly two decades.
In addition, their mortgage applications are expected to be granted to more black and minority families than in the past.
That’s because, in addition to traditional credit, the new VantageScore and FICO score now take into account information about rent, utilities, and phone payments.
“Demanding both credit scores, when available, will increase the number of borrowers that institutions can rate more than just one, which will improve their management of credit risk while expanding responsible and sustainable access to credit for borrowers with less credit strength,” the FHFA Director said. Sandra Thompson At the annual conference of the Mortgage Bankers Association.
“We also recognize that requiring two different scores for each borrower is a big change. Credit scores are used throughout the mortgage lifecycle. Our goal is to increase accuracy and comprehensiveness while ensuring a smooth transition and avoiding unnecessary complexity and implementation burden.
“We also announce that institutions will require two, rather than three, credit reports from national consumer reporting agencies. We expect this change to reduce costs and further enhance innovation while not compromising accuracy and predictability of borrower repayment capacity.”
Who benefits?
It is believed that as many as 53 million Americans lack a sufficient credit history for the FICO form to be considered.
Black households have been particularly affected, and they are more likely than any other group to lack a FICO score or have a score below 620, the minimum credit score required for a borrower.
An additional 37 million people will be able to earn credit thanks to the new VantageScore ratings.
According to the foundation, by taking into account the new criteria, they expect 10.7 million borrowers, including about four million minority borrowers, to receive a score of 620 or higher.
“This action today will enable millions of Americans to access mortgages due to VantageScore’s more predictive credit score and will correct some of the historical imbalances we’ve had in order to match mortgages,” said VantageScore’s CEO. Silvio Tavares.
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