Yes, it looks like the pendulum is swinging again, this time with changes that may allow more loan applicants to qualify for their mortgages. A recent Consumer Financial Protection Bureau study found that some consumer’s credit ratings were being unfairly penalized for paid and unpaid medical debts. As a result of this study, FICO, the most used credit-scoring system, announced they were changing some of their criteria. This should allow some borrowers scores to change significantly over this next year. A borrower whose only major issue is an unpaid medical bill could see their score improve by 25 points. It will be a long process and will take time, so those borrowers should be patient before moving towards a purchase of a home.
The credit scoring will not remove any unpaid medical debts from a credit report, so lenders will still be able to factor that into their lending decision.
In addition, two large national credit bureaus, Experian and Transunion, have announced they’ve added verified rental payment data into credit files, which will be used to compute a consumers score when applying for a mortgage. A recent Transunion report showed that including this rental data could raise many scores by 10 points or more.
Will this affect the community banker much? Probably not, but a change here and a change there does make a move for looser loan requirements. Hopefully it will never go to the extreme’s that we have seen this past 10 years.