Arriving Summer of 2020: The New FICO 10 Scoring Model. Here's What to Expect ...

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Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI
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Arriving Summer of 2020:  The New FICO 10 Scoring Model

Here's What to Expect ...

 

 

Hotter temperatures aren't the only thing that will soon be rolling in.  A hot new FICO Scoring model will also make its entrance at some point during the upcoming summer months ... 

A new credit scoring model isn't that surprising of a development.  Since its inception in 1989, FICO Scoring has evolved and changed many times.  


This new and latest version, called "FICO Score 10 and FICO Score 10 T", is to be released to credit bureaus this coming summer or early fall.  It will feature some broadened elements to the calculation of credit scores.

The latter version ... FICO Score 10 T ... will utilize what is called "trended data".  As the tag-name suggests, this scoring model will use a wider scope when taking consumers' financial actions into account.  Trended data reveals just how a consumer uses their money and the credit they have available to them.

FICO Score 10 T will analyze and weigh:

  • A consumer's credit habits
  • HOW consumers utilize their monies to address their debt(s)
  • HOW account payments were made over a 2-year period (thus establishing a trend)
  • Delinquencies (if any), will be weighed more harshly than in the past
  • The RATIO of Debt Utilization VS Available Credit
  • The LENGTH of a consumer's credit history
  • Personal Loans, often seen as riskier, will now be flagged and considered
  • The "cocktail" or mix of your credit usage 


Just how much benefit a consumer realizes (or doesn't) from this new credit scoring model will be mainly dependant on how they've handled their credit/debt over a trended data 2-year window.  

  • If a consumer has managed their credit/debt well, utilized lesser amounts of available credit, and avoided payment delinquencies ... they may see a small modest boost in their credit score
  • If a consumer struggles with the management of their credit/debt, has higher credit utilization ratios (higher balances) or has late/missed payments ... they will most likely see a drop in their credit score


When a consumer may see a change or benefit from the new scoring model is also dependant on many things.   

 

Why?  Because there are so many older versions of FICO Scoring available and still in use. 

It's quite feasible that an applicant might receive a lower score from one lender using the new "FICO Score 10 T" model ... and not run into issues when applying for a new loan or home mortgage from other lenders.  

Again why?  Those Lenders could still be utilizing an older credit-scoring model that would award the applicant a higher score.  This aberration might occur until all lenders are using the newer FICO scoring model.

But until that time, most mortgage lenders continue to use credit-scoring models that are mandated Fannie-Mae and Freddie-Mac compliant.  They do this because they "sell" their loans to these government-sponsored enterprises (commonly known as GSE's).  These enterprises guarantee loans in the secondary market.

Both Fannie-Mae and Freddie-Mac require that an available or usable score is utilized during the underwriting process for loans.  Most mortgage lenders currently receive their "usable" credit scores from the 3 major credit bureaus ... ExperianTransUnion, and Equifax.  And as of this writing, all three (3) of the credit bureaus are still using an older FICO Scoring model, not the latest/new version(s).  

With so many credit scoring models out there and being used, it's easy to understand why consumers get somewhat confused and maybe even a bit frustrated when trying to learn their credit scores.  In today's world, a consumer can ... at the same time ... carry one credit score via a credit card company, have another score reported to them by an auto dealer, and still a third set of scores utilized by their mortgage lender when applying for a home loan.  

Once again, this is the case because each entity is using a different scoring model.  This is an issue and conversation often raised by my clients when they're applying for their mortgage.  And while I agree it can all be a bit confusing, the advice I offer on this matter never waivers.

Especially for those hoping to secure a home loan in the near future, their focus needs to remain steadfast and on the credit scores I'll be using as their mortgage lender.  They are the only ones that matter during the time of application and during the mortgage processing.  

In order to determine what those important credit scores are, home buyers and those hoping to refinance need to get out ahead of the mortgage application process.  Planning and preparation needs to be completed.  

Hopeful buyers and applicants should always:

  • Check their credit well in advance of application.  (6 months to a year is recommended)
  • Get a FREE credit report at:  annualcreditreport.com  (Free reports can be performed every four months, if staggering requests to the major credit bureaus)
  • Thoroughly review their report for errors and correct them, should they appear
  • Focus on reducing the ratio of debt held
  • Reduce spending, when and where possible
  • Pay all bills on time
  • Don't apply for new debt
  • Do NOT close old accounts out
  • Hold a preliminary conversation with a Mortgage Lender
  • Develop and maintain good credit practices


Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.”

Ben was one smart man, especially as it pertains to mortgage application.  Preparation is key to the success you'll find and the ease and fluidity with which you'll find it.

Plan and prepare well and it will not matter which scoring model is being used.  You will successfully reach your financial goals ...

 

 

* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicago - Chicagoland - IL/WI?

Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf.
I'm easily found at:


 
Gene Mundt
 
Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI License #216987
 
American Portfolio Mortgage Corp.
 
 
NMLS #175656
 
 
Direct: 815.524.2280
Cell: 708.921.6331
eFax: 815.524.2281
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

Your Referrals & Testimonials are Always Greatly Appreciated! 

 

 

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Karen Simms 03/06/2020 11:12 AM
  2. Roy Kelley 03/12/2020 01:00 AM
  3. Joseph Doohan 03/08/2020 01:26 AM
  4. Kat DeLong 03/08/2020 05:11 AM
  5. Frank Rubi 03/12/2020 05:06 AM
Topic:
Lending / Financial
Location:
Illinois Will County New Lenox
Groups:
Realtors®
Mortgages
Buyer Information - What Buyers Need to Know in Today's Market
Bananatude
Tags:
mortgages
debt
credit scores
credit reports
fico scores
homebuying
debttoincome ratios
fico changes
ficocredit score

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Ambassador
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Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
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Thanks, saving this one, Gene. You always say it so well - and as you mention, planning and preparation are key. 

Mar 04, 2020 03:40 PM #6
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Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
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Ironically you just reminded me of a bill I need to pay. Better get on that before it's late and I'm more harshly judged.

Mar 04, 2020 03:45 PM #7
Rainmaker
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Mel Ahrens, MBA, Kelly Right Real Estate
Kelly Right Real Estate - Hood River, OR
Customized Choices for your Real Estate Needs

Great information. I was not aware of the impending change in FICO. The trending characteristic will be interesting to follow and see the results.

Mar 05, 2020 12:34 AM #8
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Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

Thank you Gene, in the end it's up to the individual to mind their financial habits to ensure a healthy FICO score. 

Mar 05, 2020 03:51 AM #9
Rainmaker
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Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Gene. Thanksfor the heads-up! Those in doubt should seek you out for proper guidance. Enjoy your day!

Mar 05, 2020 04:54 AM #10
Rainmaker
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Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Good morning, Gene... no one explains these complicated issues better than you do! Thanks for the great explanation which I can share with my own clients.

Mar 05, 2020 07:09 AM #11
Rainmaker
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Rob Spinosa
Guaranteed Rate, Marin County, CA - San Anselmo, CA
SVP of Mortgage Lending, Marin County

Excellent info.  Way to get ahead of this, Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi.

Mar 05, 2020 07:11 AM #12
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gene excellent job on this blog, well deserved feature.  It is going to be interesting what the impact will be on mortgages until all Lenders get on the same page.

Mar 05, 2020 04:21 PM #13
Rainer
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Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Gene,

Interesting. This might be a bit of a rough road for a few people, who do not maintain good credit hygiene. Another reason to hurry up and buy something.

Mar 05, 2020 09:02 PM #14
Rainmaker
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Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi this is great information..... and I'll bookmark it for future reference.... congrats on the feature.... I always enjoy posts about credit and issues that arise when applying for a mortgage....

Mar 06, 2020 01:52 AM #15
Rainmaker
2,181,422
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - Thank you for always keeping us informed of what's going on in the Mortgage Industry. Should we plan to expect buyers to take longer to qualify? On average, provided there's good credit, how long will it take to get loan approval? If buyers have issues, are you looking at an additional 10 days or more to get approval or clear to close? Will this impact VA & FHA loans significantly? 

Mar 06, 2020 03:32 AM #16
Rainmaker
328,016
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

Thank you for the heads up on the new scoring.  Makes sense.  It will be interesting to see the actual score changes with the new criteria.

Mar 06, 2020 05:13 AM #17
Rainmaker
84,189
Karen Simms
Century 21 Arizona Foothills - Queen Creek, AZ
Horse Property Specialist

Great information!  Thanks for posting.  It will be interesting to see how this plays out.

Mar 06, 2020 11:02 AM #18
Rainmaker
5,780,514
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

This is important information to share with prospective mortgage borrowers.

Mar 07, 2020 05:47 AM #19
Rainmaker
5,780,514
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

I used the Short URL to post this blog on my Facebook timeline.

Mar 07, 2020 05:58 AM #20
Rainmaker
1,907,386
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Thanks for this timely update and this is why I still love AR !!! Laura T. Perry    Jesse Keim 

Mar 08, 2020 07:44 AM #21
Rainer
161,356
Adam Feinberg
ANCHOR ASSOCIATES - Manhattan, NY
NYC Condo, Co-op, and Townhouse specialist

Thank you so much for breaking down the differences. I used to work with quants, economatricians, etc - so I really appreciate what goes into a particular financial model. Manhattan is mostly portfolio lending so this is a bit less relevant here but I still find it valuable to understand the components of this model.

Mar 09, 2020 09:36 AM #22
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Lynn B. Friedman
Atlanta Homes ODAT Realty Call/Text 404-939-2727 Buckhead - Midtown - Westside -- and more ... - Atlanta, GA
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi 
Thanks for the full report on the changes coming up.
All the best - Lynn

Mar 09, 2020 08:19 PM #23
Rainmaker
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Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Good Tuesday morning, Gene.

Thanks for your comments on my recent post.

Mar 10, 2020 08:35 AM #24
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Frank Rubi
Frank Rubi Real Estate, LLC - Metairie, LA
FrankRubiRealEstate.com

Important information and some clarity on this upcoming change. Thanks for Sharing. 

Mar 12, 2020 05:04 AM #25
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

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