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Mortgage

What Fannie MaeÕ new credit reporting means for would-be homebuyers

The key changes you need to know

Fannie Mae just made some major changes to the credit reporting industry. If you’re like me, and don’t have much of a debt history, it can be difficult to build credit. With the use of trending credit data, that could become much easier.

For background, Fannie Mae was set to release a heralded update to its Desktop Underwriter program that could have opened up the credit box to potential borrowers previously deemed unworthy, the government-sponsored enterprise, however it unexpectedly and indefinitely delayed the implementation of Desktop Underwriter Version 10.0.

Earlier this year, Fannie Mae announced that it planned to release the latest update to Desktop Underwriter on the weekend of June 25.

After the delay, however, the company resolved the issues that caused the delay, and set a new date for the implementation of using trending credit data-the week of September 24.

As scheduled this time, Fannie Mae implemented its new trending credit on September 26.

So what does that mean for homebuyers? How will this affect your credit? And what new things can you do to improve your credit?

An article by Ann Carrns for The New York Times takes a look at these questions.

From the article:

Does this mean I should always pay my credit card bill in full?

Even if you can’t always pay the balance in full, it’s always a good idea to make more than the minimum payment, to pay down your balance and save on interest charges. The addition of the extra payment information in credit reports used in many mortgage applications means that paying more than the minimum, if borrowers are able, makes even more sense, Ms. Armstrong said. [Mindy Armstrong is the Desktop Underwriter product manager in Fannie Mae’s single-family homes division.]

Will the extra payment details affect my credit score?

No, at least for now. The dominant consumer credit scores, like FICO, don’t yet factor in these extra details, Ms. Armstrong said. So while the new data may affect whether a borrower qualifies for a loan, it won’t have a big impact on the interest rate offered, she said, because loan pricing is determined mainly by your credit score. But, she said, it’s likely that credit scores will eventually be calculated using the expanded data.

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