Changes In FICO Scores And What That Means To The Real Estate Market

Changes In FICO Scores And What That Means To The Real Estate Market

So here is the latest headline when it comes to creditworthiness. Fair Isaac’s FICO scores have been the loan and credit industry standard since 1989 and as such they have provided a stable and accurate method of reporting credit worthiness. New changes on the horizon, which have been instigated by the federal government, may drastically change the banking and credit landscape in the real estate arena.

There are three changes that will cause credit scores to inflate thus giving a large number of people the ability to qualify for credit for which they would not under the current system. First if someone pays off a debt through collections that debt would no longer effect their FICO score. Second and I like this one, medical bills will have a lessor effect on FICO scores. So if all a person has going against them is bad medical billing they could see their score jump upward of twenty points. The third change relates to the length of a persons credit history in that the new algorithm will give higher grades to newer unproven buyers.

What does that mean for Realtors®? Well for one we will probably see more buyers entering the market, which is good. Unfortunately it could also lead to more defaults if banks are forced to issue loans to less that prime borrowers. I am excited about the possibilities but don't want to throw caution to the winds.

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Phone: 480-426-1590
Dated: August 26th 2014
Views: 340
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2075 S Cottonwood Dr.
Tempe , AZ