Millions of Americans will now have a credit score that qualifies them for a mortgage thanks to a major FICO score change.
The Federal Housing Finance Agency shared that mortgage lenders will need to start using credit scores from VantageScore.
This will be done when mortgage lenders are evaluating someone trying to take out a loan.
What does this mean for mortgage borrowers and potential homeowners?
According to The Sun, this means lenders will now need to include a new version of the FICO score. This is the first time it’s been adjusted in almost 20 years.
This is also going to help minority households qualify for mortgages more than before.
The VantageScore and new FICO score will look at information regarding rent, utility, and phone payments. This means for those that have these added layers of good credibility, their chances of getting approved for a mortgage are now higher.
On top of the credit change, your credit score must be at 620 or higher.
The updated scores could qualify people who have always been good about paying their rent, phone, and utilities on time.
Why will this help mortgage borrowers and potential homeowners?
The FICO score provides information to lenders that gives them an idea of your risk.
Before now, things like utilities and phone or rent payments have not been taken into consideration.
Minority households tend to have less traditional credit history, but they do have rent and utility payment history.
The way the current FICO model is doesn’t allow 53 million Americans to have their credit history taken into consideration for a mortgage.
The new FICO model will help around 37 million more people qualify for credit scores.
About 10.7 million peple are expected to have their scores boosted above 620 from the change.
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