New Change To Mortgages To Affect 10 Million Americans
Millions more Americans can now get mortgages because lenders are making changes to how they figure out credit scores.
The Federal Housing Finance Agency said this week that mortgage lenders must use VantageScore to evaluate potential borrowers.
This change means that for the first time in nearly 20 years, lenders will use a new version of the FICO score.
It also means that more Black and other minority households are likely to get mortgages than before.
This is because both the VantageScore and the new FICO score consider information about rent, utility, and phone payments, in addition to traditional credit.
Maximum loan size is one of the requirements for Fannie Mae and Freddie Mac loans. This amount is $647,200 for the majority of the country. A minimum borrower credit score of 620 is also necessary.
With these modifications in place, more people may be able to qualify with an updated score that now includes past rent, utility, and phone payment histories.
FICO's credit score gives a glimpse of a borrower's risk, but it has previously missed crucial aspects like on-time rent or utility payments.
Who will benefit?
Minority households typically have less traditional credit or borrowing history, but they frequently have great rent and utility payment histories.
An estimated 53 million Americans lack sufficient credit history to be considered by the current FICO model.
Black households are disproportionately affected, as they are more likely than any other group to lack a FICO score or to have one that is less than 620.
The new VantageScore evaluations will allow 37 million additional people to qualify for credit scores.