If you’re looking to enter the housing market, it may have just become easier for you to acquire a loan. Home mortgages are typically based on Fair Isaac Corp. (FICO) credit scores.
FICO scores are given to individuals based on a number of factors like payment history and the number of credit accounts and more. Three major credit rating agencies, Equifax, TransUnion and Experian, are dropping, tax liens and civil judgments from consumers’ profiles if the information isn’t complete. As a result, this is estimated to raise the scores of approximately 12 million U.S. consumers.
According to an article by Diana Olick for CNBC, “It’s a significant impact for still a very large number of people,” said Thomas Brown, senior vice president of financial services at LexisNexis, who is concerned that the move will add significant risk to the mortgage system.
“If you look at someone that has a tax lien or a civil judgment, they can be anywhere from two to more than five times riskier just because of the presence of that information,” he said. “That’s very, very significant.”
In addition to the changes the major credit agencies are making, mortgage giants Fannie Mae and Freddie Mac are allowing borrowers to have higher levels of debt and still qualify for a home loan.
Both changes could help millions of more borrowers qualify for a home loan.
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