Trended Credit Data & How it Affects Financing
Trended credit data is finally here! Wait....you don't seem very excited. Ok, 'trended credit data' isn't exactly a sexy phrase, but it's one that will change the industry in the very near future with the upcoming release of a new DU (desktop underwriter) system that will determine the approval or denial of many mortgage applications.
So what's new?
Until now, when a mortgage company pulled a credit report, the report was a snapshot of that moment in time - how much does an applicant owe? Have they been late? It's a still frame. With trended credit data, a good analogy would be that a borrower's credit history will now be shown like a video. Not only will we know if they made a payment, we'll know if they made a minimum payment, paid extra toward a balance, or paid something off in full. We'll see their spending, saving, and debt management habits for a 24 month period. In essence, an applicant's credit worthiness will be determined by all of the things that have been judged for the past decade, and their overall payment trend.
Trended credit data isn't yet factored into credit scores, but the possibility isn't far off into the future. This data is also not something an underwriter is supposed to factor in when manually underwriting a file. It's only supposed to affect automated approvals run through an automated underwriting engine, and overall, it's aniticipated that the total number of approvals shouldn't change...much.
If you'd like to learn more about trended credit data, the difference between transactors & revolvers, and potential problems and headaches this could cause for you & your clients in the future, check out this page and please don't hesitate to share it, as this change to credit reporting is likely to be the first step in a shift in lender's risk management systems and underwriting procedures. The immediate impacts may not be huge, but long term, trended credit data will be a game changer.
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