FICO introduces new mortgage credit score

A new FICO mortgage credit score unveiled on July 10th casts a wider net to capture consumer behavior not previously considered in whether to grant a home loan. Proponents say it will make more people eligible for a mortgage, but critics say that wider net may pull in new inaccuracies and create additional privacy concerns.

On July 10, the consumer credit score giant FICO joined with data firm CoreLogic in announcing the new score designed specifically for mortgage lenders called the FICO Mortgage Credit Score Powered by CoreLogic. The mortgage score is based on information provided by CoreLogic in a detailed report called the CoreScore Credit Report.

The report includes information that other credit reporting agencies, such as Experian, TransUnion and Equifax, don’t factor into your traditional reports. If you were late on child support payments, applied for a payday loan or had trouble paying your rent on time, it could show up on your CoreScore Credit Report and be factored into your new FICO mortgage credit score. But on-time payments on a second mortgage will also be factored into your score, as well as all those months you paid your rent like clockwork. It’s not intended as a replacement for traditional FICO credit score, but as another tool for mortgage lenders to use early on, at the prequalifying stage for borrowers. It’s simply bringing in additional data.

The level of detail is unbelievable. Consumers will be surprised by just how much information about them is out there and will need to be more diligent on checking their file. Consumers really need to be aware that, more than ever, everything they do with respect to their finances is somehow tracked and kept in a database.

Is it good for consumers?
Critics say the extra information in the CoreScore credit report unfairly hurts consumers who have already been knocked down by the economy, especially those with lower incomes. When you’re including things like evictions and child support, it’s going to affect those who are at the lower end of the economic spectrum. People who are going through divorce, anyone with an underwater mortgage, or anyone who bought or refinanced property between 2004 or 2007, could be at risk.

They argue the past three or four years, economically, have been a challenge. When you’ve got folks who have struggled with on-time payments or because of unemployment or disability, when you really kind of boil it down, this credit score report will magnify those problems. It will probably make it a little bit harder for people to rebuild that credit quicker.

But isn’t that the point to make sure that the Lender has a clear picture of the borrower? Regardless of the circumstance, late payments are late

Advocates counter that the CoreScore report helps consumers more than it hurts them. That’s especially true, they say, for consumers who have thin files and would have otherwise been turned down by lenders because they didn’t have enough experience with traditional loans, such as credit cards and auto loans.

Nontraditional data could help that consumer who has positive alternative credit get the credit they deserve. For example, a consumer who doesn’t have any credit cards, but has repaid a payday loan on time could benefit by the extra information in the report.

A consumer who has a mortgage with a credit union that does not report to the credit bureaus would also benefit from the new report. In addition, short-term installment loans may help a borrower show good behavior that would not be visible on his traditional credit report.

Critics question accuracy of new credit score
Some critics worry that using the nontraditional data, such as rental information, could also disadvantage consumers unnecessarily. They are concerned that this information shows up without the complete picture. For example, if a tenant withholds rent rightfully under some state laws, that will show up as a black mark and hurt their chances. Personally I disagree as the borrower in this case would hopefully have copies of the escrow rent that was done through the courts.

The other issue is whether consumers will be able to quickly dispute and resolve inaccurate information or if their complaints will end up in one of these automatic dispute systems that get you nowhere.

The ability to quickly dispute inaccurate information is especially important because much of this data is sourced from public records. That could lead to erroneous information getting into the report, especially if consumers with the same name are mixed up. In states such as Florida, personal information that could otherwise be used to accurately identify us (such as Social Security numbers and account numbers) must be redacted from the file prior to them being available for public review. This opens the door to misreporting and misapplication of judgments, evictions and other public records in the person’s CoreScore that are based on the person’s name alone.

CoreLogic says that the company works hard to make sure the information is accurate. As a company, they have been doing this for a long time and the accuracy of their data is the utmost concern. The majority of the public record data is double-keyed, to help ensure it is entered into the database as accurately as possible. The data is specific to the individuals reflected on the public record document. Personally identifiable consumer data beyond the name is compared to determine what data to display for a specific consumer report.

Consumers can dispute an item by contacting CoreLogic Credco at 877-532-8778. They claim they will diligently uphold all of the consumer protection and fair credit reporting regulations to protect consumer interests. 

Under the Fair Credit Reporting Act , consumers can get any credit report free, once a year, including CoreLogic’s. You have to do so by contacting the agency issuing the report. Currently, consumers can obtain one free report per year from each of the three major credit bureaus — Experian, Equifax and TransUnion — at AnnualCreditReport.com . FICO/CoreLogic hope to join AnnualCreditReport.com’s offerings in the near future, but currently that report is not being offered there.