The newest credit scoring product, the FICO 8 Mortgage Score, is supposed to do a better job at predicting if homeowners will keep paying their mortgages.
The latest credit score product, now available from all three major credit reporting agencies, offers mortgage lenders “more precise risk assessment tailored for the real estate market,” according to Fair Isaac Corp., the Minneapolis-based company that devised the FICO score.
The widely used credit score is an important factor for homeowners seeking to refinance their current mortgage or a mortgage to a purchase home. While a 700 score is considered good, Borrowers typically need a score around 620 or 650, depending on other factors like their amount of home equity, to obtain a mortgage loan.
A lower score can mean paying a higher mortgage interest. Check current mortgage rates 메이저사이트. A 100 point difference, Fair Isaac says, can mean paying $40,000 in extra interest payments over the live of a 30-year, $300,000 mortgage.
Borrowers should check their credit score at myfico.com before applying for a mortgage to check for any mistakes and outdated information in the report, which can be costly. Paying bills on time, keeping debt levels low, and not applying for credit often can also help your credit score. Free FICO® Credit Score Estimator
The FICO 8 Mortgage Score keeps the same 300 to 850 range but is designed specifically for mortgage lenders and servicers, who administer the loans.
The new score, according to Fair Isaac, helps mortgage servicers spot homeowners at risk of defaulting and seek solutions to avoid foreclosures. It might be able save the mortgage industry $1 billion in foreclosure costs and help over 100,000 homeowners keep their homes.
Placing greater emphasis on mortgage payments, the new score helps mortgage services spot at-risk homeowners by pushing homeowners who are over 90 plus days late into lower scores.
The new score takes into account extra data sources on consumer credit to improve its predictive ability by up to 25 percent, the company says. The new score is also supposed to be easier for lenders to explain to mortgage borrowers.
“The FICO 8 Mortgage Score’s broad availability means that all U.S. lenders and servicers can now easily access scores that are fine-tuned for mortgage performance,” said Jordan Graham, an executive vice president at FICO.
“To do the best job of evaluating risk and increasing profits, lenders need updated credit scoring analytics that incorporate mortgage credit performance since the subprime mortgage meltdown,” said Craig Focardi, senior research director at TowerGroup
