Traditional credit reports and scores don’t typically take into account all the bills that you pay on time like clockwork each month – like your rent and utilities. In some ways, it’s unfair that you could get turned down because you missed a few credit card payments several years ago when you pay so many other bills on time each month. Lenders don’t really get a complete picture of your financial habits when you’re applying for a major loan. And unfortunately, if you’re one of many borrowers who rarely or never uses credit, you may not qualify at all because you don’t have enough credit history.
FICO’s recent partnership with CoreLogic, a newer credit reporting agency, could allow more borrowers to qualify for a mortgage because CoreLogic’s new credit report includes more payment data than that of traditional credit scores.
Most people are familiar with FICO, the company who created the well-known credit score by the same name. CoreLogic is a credit bureau but supplements consumer credit reports with data the big three credit bureaus – Equifax, Experian, and TransUnion – typically don’t report.
CoreLogic’s credit report, the CoreScore Credit Report, includes data like rental lease applications, evictions, payday loans and associated charge offs, and child support payments in addition to the traditionally reported pieces of credit information. This non-traditional credit data gives lenders a more holistic picture of borrowers. The credit report was only introduced in October 2011.
The result of FICO and CoreLogic’s parternship is a new credit score that mortgage lenders can use to qualify applicants: the FICO Mortgage Score Powered by CoreLogic. Because the CoreScore Credit Report includes more types of financial information, the credit score could better predict a borrower’s ability to handle a mortgage loan.
In a press release, CoreLogic said that 70% of consumers in a 300,000 sample scored higher with the FICO Mortgage Score powered by CoreLogic than with typical credit scores. In fact, more consumers had credit scores in the 800 to 850 range with the FICO Mortgage Score powered by CoreLogic than with a typical FICO Score. However, consumers with scores between 640 and 799 generally have better scores with the typical FICO Score than with the new FICO Mortgage Score powered by CoreLogic. Ultimately, the lender decides whether to use both scores, the higher score, or an average of all scores checked.
CoreLogic and FICO haven’t released specific information about credit score factors, so it’s unknown how much certain actions, like a rental application or child support delinquency, will affect the score. Traditional FICO scores are based 35% on payment history, 30% of the amount of debt you have, 15% on the age of your credit history, 10% on types of credit you have, and 10% on your recent applications for credit.
Consumers have the same rights with the new CoreScore Credit Report as with other credit reports. For example, you have the right to a free CoreScore Credit Report each year. You also have the right to dispute inaccurate information you find on your report. However, the report isn’t available through AnnualCreditReport.com. You’ll have to contact the company directly by calling 877-532-8778 to order a copy of your credit report and to dispute any inaccurate information.
Sources: FoxBusiness.com, BusinessWeek.com, CoreLogic.com
