Millions of potential homebuyers won’t qualify for new FICO score: Will it affect your buyer power?

Slated for 2019, the UltraFICO model may widen the pool of borrowers overall. However, homebuyers seeking mortgages backed by Fannie and Freddie will not have access for years

A new credit score that would improve mortgage eligibility for numerous borrowers won’t lend help to a considerable range of prospective home buyers anytime shortly.

FICO, the provider of credit score models utilized by several mortgage lenders. It declared UltraFICO Score last week, with a company government hailing it as a “game-changer.”

The new model will generate higher credit scores for borrowers by factoring in data from checking, savings, and cash markets accounts. Data that has historically been overlooked. The score will launch as a pilot program for lenders in early 2019.

It’s virtually sort of a “second-chance score,” David Schellenberg, senior director of scores and analytics at FICO, recently told NerdWallet. The score, he added, has the foremost potential to benefit borrowers with very little credit history. Moreover, people who are attempting to enhance their scores after a financial crisis.

If you want to know how it will affect you, give me a call. I can help you find the best way to qualify to buy a home 210-418-0067.

Borrowers will apply for an UltraFICO score by granting permission to contribute data from banking statements. As the length of your time accounts is open, frequency of activity, and evidence of saving. Operating in tandem with FICO, that knowledge may be browsed by Finicity and mixed with credit data from Experian “to offer an increased read of positive money behavior,” FICO said in a handout.

The score may improve credit access for the bulk of Americans. So, it would be particularly helpful to those “who fall within the grey area in terms of credit scores (scores within the higher 500s to lower 600s) or fall slightly below a lender’s score cut-off,” according to FICO.

“It also enables a deeper dialogue between the consumer and lenders to assist each party builds better money decisions,” Jim Wehmann, executive VP of Scores at FICO, said in a statement. “It’s a game-changer.”

The score is set to be broadly offered to lenders in mid-2019. About four million shoppers may see a 20-point increase to their credit score under the new model. Moreover, it may enable some shoppers to qualify for mortgages. Furthermore, it might otherwise be denied to them, HousingWire rumored.

But despite all the excitement, the score’s applicability in the mortgage area can stay extremely restricted for the predictable future.

Why?

Because mortgage lenders won’t be ready to use UltraFICO for underwriting mortgages backed by Fannie Mae and Freddie Mac. So, the 2 government-sponsored enterprises that back a massive swath of American mortgages.

In July, the Federal Housing Finance Agency (FHFA) the agency that oversees Fannie and Freddie, deferred its explore for different credit scoring models. It would be utilized by lenders originating mortgages backed by 2 corporations.

The agency said at the time that it was shifting its focus to implement Section 310 of the economic growth, regulatory relief, and consumer Protection Act. A law enacted in may that needs FHA to “define through rule-making. The standards and criteria the Enterprises will use to validate credit score models.”

The hunt for a brand new credit score model was “duplicative of, and in some respects inconsistent with,”. The works the agency was tasked with doing under that law. When the FHFA has fulfilled its rule-making obligations under the law, it’ll implement them.

This means a decision by the agency to approve new models like UltraFICO may be delayed as the way out as 2020, HousingWire rumored. For now, mortgage lenders reportedly will continue using Classic FICO for Fannie and Freddie-backed mortgages.