Trended Credit Data is in Your Future

Historically, buyers and mortgage lenders have relied on FICO credit score modeling for mortgage credit qualifications and decisions. Trended Credit Data will replace this model as soon as April 1st, 2016. Here are some additional details:

Since the start of the year, there has been a steady stream of information coming out regarding trended credit data – and it promises to keep on coming. In the interest of helping you get prepared, here’s what I can share with you thus far:

• Trended credit data is a two-year historical perspective on a consumer’s utilization of credit for all of their active tradelines – including revolving accounts (such as credit cards) and installment accounts (such as mortgage and auto loans). This new data will help lenders determine things like if a borrower tends to pay off revolving credit lines each month or if they tend to carry a balance month-to-month while making minimum or other payments. In addition, seasonal and sudden changes in revolving credit behavior will be revealed.

• Fannie Mae is currently incorporating trended credit data into its Desktop Underwriter (DU) Version 10.0 and will be implementing it during the weekend of June 25, 2016. That means, because credit reports have a 90-day shelf life, lenders will have to start using trended credit data on April 1 when underwriting single family borrowers through DU.

• While each of the three national credit bureaus currently offer trended credit data in some format, only TransUnion’s CreditVision and Equifax’s Dimensions trended credit data sets will be required by Fannie Mae in June. Experian’s trended credit data is currently not part of the Fannie Mae rollout, but could become part of the requirements at a later date.

Exactly how this new data is going to be used in underwriting has yet to be disclosed. Fannie Mae is expected to be providing guidelines in March. In the meantime, lenders and buyers can at least take comfort in the fact that with a more comprehensive depiction of a borrower’s approach to credit management, they will be better equipped to make a more accurate assessment of the applicant’s creditworthiness.Stay tuned for more information.