An important change in the way credit reports are compiled is due to launch on June 25th.
New trended credit data reporting was initially announced last fall by The Federal National Mortgage Association (FNMA), better known as Fannie Mae, the government-sponsored, leading source of financing for mortgage lenders.
Now just a few weeks away from launch, the new data will dig deeper than ever before into a mortgage applicant's credit history to provide a more thorough analysis.
Current credit reports used in mortgage lending only indicate outstanding balances and if a borrower has been on time or delinquent on existing credit accounts, including credit cards and student loans.
The new trended data will provide a much more in depth analysis of borrower behavior, by providing access to monthly payment amounts that have been made over time. It will reveal, for example, if an individual just pays minimum due amounts, more than that, or settles the entire balance each month.
From June 25th, lenders will therefore be able to determine if borrowers pay off revolving credit lines like credit cards each month or if they tend to carry a balance from month to month while making minimum or other payments.
This is part of a number of measures being introduced to enable better qualified buyers to have more access to mortgage credit. The clear subtext is that, by exhibiting good management of one's own credit, one can enhance the opportunities to secure a home loan, while global lending standards are maintained and, indeed, enhanced.
It is, however, important to remember that long established assessment criteria such as credit scores and debt to income ratio will still be as important as before. The key difference will be that those individuals who carefully manage their credit lines will be more clearly distinguished from other prospective borrowers with financial habits that would be deemed to represent a higher lending risk.
For many borrowers who have previously been turned down for a home loan, but who can demonstrate excellent money management, these new rules could represent another opportunity for home ownership.
As ever in such matters, you are strongly advised to seek professional financial guidance, relevant to your individual circumstances. Such advice is freely available to you via this link.