Fair Isaac Corporation’s (FICO®) newest risk assessment tool will be shedding more light on your credit history, and that could make qualifying for a mortgage even more challenging. The new tool, which is called BEACON® Mortgage Score, is designed specifically for mortgage lenders and is expected to be the most robust and accurate tool for measuring mortgage risk and financial management / responsibility. Sounds impressive, doesn’t it? It is, if you’re a mortgage lender. However, if you’re a current homeowner looking to modify your mortgage or if you’re a homebuyer in the market for a home and need to qualify for a mortgage loan, BEWARE! The BEACON score makeover means you’ll need to make changes in how you handle your financial obligations in order to qualify for a mortgage product you desire.
The new BEACON® Mortgage Score tool will have some features of previous BEACON score products, including maintaining the current scoring table, which goes from 300 – 850. It will also maintain the current policy on how inquiries affect your credit score. What’s new is that now, in addition to the already existing reason codes used to explain information of your report, there will be an additional 15 more codes. However, the biggest potential challenge for those of you trying to qualify for, refinance, or modify a mortgage loan is the fact that even more data will be used to scrutinize your mortgage loan credit worthiness; unfortunately, what type of "additional data" is used has not been released but it has been said that the information is based on information that Equifax collects on credit holders. (This is a prime reason to make you’re your credit information on file at Equifax is correct!)
While that’s certainly enough changes for any current or soon-to-be homeowner to digest, there could be more. Now, to be clear, FICO® has not announced changes beyond those listed above as of this writing. However, it wouldn’t necessarily be a stretch for FICO’s BEACON® Mortgage Score to take on some of the characteristics of FICO Risk Score, Classic 08, which is the new FICO® risk tool for assessing business’ credit worthiness. IF additional changes occur for BEACON® Mortgage Score that do follow FICO’s business product’s lead, some of the additional changes that may affect your ability to qualify for a mortgage loan might include:
* Preference for mortgage applicants with long history
* Longer, deeper looks into credit histories so that what’s on a credit report as well as the patterns that emerge based on that information are taken into consideration
* The influence of the types of creditors and / or blemishes on a credit report being weighted
As you can see, the current mortgage and economic crisis is already causing mortgage and other financial industry professionals to take strides to protect themselves future risk. As we watch to see how the industry attempts to "fix" itself, the best thing you can do—as a homeowner or a homebuyer—is to put yourself in the best financial position for obtaining or modifying a mortgage. So, be proactive and keep your credit history in as best condition as you can. That way, when Equifax begins providing BEACON® Mortgage Score scores to lenders in April, you’ll be able to qualify for a mortgage loan right away or whenever you need one.
