Your Mortgage and Trended Data Credit Reports

Your Mortgage and Trended Data Credit Reports

What you need to know

By Doug Minor

The phrase trended credit data may not mean much to you now. But if you’re shopping for a home loan anytime soon, it will.

Also referred to as historical, longitudinal or time-series data, it basically means that credit underwriters will be looking at a lot more information when they scrutinize your credit profile.

Are you making the minimum payments on your credit cards each month? Or do you pay the balance in full?

Do you pay your accounts well before the due date? Or do you wait until just before the last day the payment is due?

Are your credit balances always near the limit? Or are you consistently paying them down, reducing your credit utilization over time?

With trended data, lenders will see all of this.

Who will this affect? Well, if you’re planning to apply for a conventional mortgage, it affects you. Conventional loans must conform to Fannie Mae guidelines—and Fannie Mae has announced that it will begin using trended data in its Desktop Underwriting (DU) program. That’s the software that lenders use to qualify borrowers for conventional loans.

Will this new approach help you as a consumer? There’s a good chance the answer is no. The lending industry is trying to put a positive spin on it, saying it will help consumers as well as lenders. TransUnion is one of the companies promoting trended data. Here’s how they put it:

TransUnion research indicates that the percentage of consumers in the Super Prime risk tier, who generally have the greatest access to new loans at the lowest pricing, would increase from 12% of the population to nearly 21%.

So for those with excellent payment habits, it could help. For those who are struggling to stay current—not so much.

Another important question: Will the people working on your mortgage really understand what all this data means? And how will they handle it? That will depend a lot on Fannie Mae’s guidelines for it—which haven’t been issued yet.

Keep in mind that, as of now, the trended data will not change your credit scores. That includes normal FICO credit scores and the ones used in mortgage lending. So, if you had a 700 score without trended data, you’ll still have a 700 score with it.

But that could change. Will FICO or Vantage change or modify the scoring models? I see that as probably forthcoming, as well as Fannie Mae updating its assessment of credit risks.

When will all this happen? Fannie Mae is targeting the beginning of July 2016 to implement this information into its Desktop Underwriting platform.

I’ll keep you posted with updates as they become available.

Should you be a cosigner? Maybe you’ve been approached by a family member to co-sign on a loan.

Maybe you’ve been approached by a family member to co-sign on a loan.
Should you do it?
As general advice, the answer would be no—just don’t do it!
Here’s something I’ve said many times as I counsel consumers or speak to groups: Think of your credit profile as analogous to your fingerprint. It’s unique to you and should stay that way. That means you should avoid mixing other people’s credit habits/history with your own.
That’s good advice. But real life sometimes places its own demands on us. You may see a person in need and feel compelled to help. It may even be a beloved family member. What should you do then? And how can you avoid walking into a trap?
The answer—control.
Control as much as you can. Make sure you’d be able to pay off the obligation yourself if things went bad—or at least maintain the payments. That reduces the risk of harm to your credit. And of course, it could also avoid harm or strain to an important relationship.
If you’re the parent cosigning for your child living at home, that has some definite benefits. Remember, the billing statements will be coming to your address. So you’ll have a chance to inspect them and address any problems. Make sure to take advantage of that situation.
What if the other signer does not live in your home? You can still exercise control and prevent harm to your credit. Set up an online account and make sure you have the username and password. Then you can log in at your discretion and verify that the payments are on time.
The decision to become a cosigner shouldn’t be made lightly—even if it’s for your child, a relative, or a good friend. You should make sure the arrangement stays within certain specific parameters. I suggest having a written agreement between the parties, spelling out what-if scenarios. That way if something does go wrong, you’re both clear as to what should happen.
If you’re going to become a co-signer, go in with a clear understanding on all sides. It will help you avoid needless grief.

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