Tag Archives: homeowners

New Credit Scoring Model For Homeowners

Photo Credit: www.mentalhealthy.co.uk
Photo Credit: www.mentalhealthy.co.uk

FICO, the primary credit scoring system used in lending, is releasing a new scoring model at some point this fall. This new 9.0 model has been advertised to contain major changes that are expected to be a big help for consumers. However, there are some things many aren’t considering with the new release.


The newest FICO model has revised previous versions to no longer penalize consumers for medical collection issues. This would seem to be big news for millions of consumers who are victim to the imperfect credit reporting systems of the medical industry. Consumers caught in this medical collection web will often find their credit scores are significantly impacted in a negative way.


Because of this, some aren’t able to qualify for home loans; and the others who are able to qualify usually take a significant hit to their mortgage rates.


So one would think this new model would be of tremendous benefit to consumers, since more would have improved qualifications for home purchases based on their new higher scores.


However, what the media hasn’t shared with us is that most mortgage lenders don’t even utilize the most current FICO scoring model in their underwriting process. The fact is Fannie Mae, Freddie Mac and most other lending institutions still use scoring models developed by FICO over 10 years ago. Many creditors haven’t even adopted the most recent FICO model that came out over six years ago. So it’s likely creditors won’t be jumping to this new model any time soon.


There are several reasons why lenders don’t leap to adopt new systems. A change in their scoring model results in a significant system overhaul, costing lenders tons of dough. The system changes also have to correlate with all the other government disclosure requirements. So the sheer cost and logistical nightmare likely won’t be worth the benefit of helping a few extra consumers. Because banks have to be profitable, we can assume their agenda would take precedence before the consumers’ needs.


Don’t sit on the fence, waiting for this prospective change to revolutionize your credit situation. It likely isn’t going to happen! You might as well do whatever else you can to accomplish your dream of purchasing a new home.


We have spent over 10 years analyzing the credit scoring system. We may have other ways to bump up your credit scores to help you through the home buying process. There is a lot of misinformation about credit scoring, including the myths surrounding credit monitoring (click here to learn why this is a waste of your money).


Every situation is unique…we’re happy to help!


NOTE: This new model is likely to take effect more immediately with consumer & revolving reports. These entities are faster to act with their adoption systems.

“Are Bi-Weekly Mortgage Payments Helpful?”

Source: The Nest (http://budgeting.thenest.com/much-biweekly-payments-shorten-30year-mortgage-29242.html)
Source: The Nest (http://budgeting.thenest.com/much-biweekly-payments-shorten-30year-mortgage-29242.html)

Loan servicers often send solicitations to homeowners touting the benefits of bi-weekly mortgage payments. Read below to learn why these may, or may not be good for you!


Bi-weekly payments do help you pay off your property quicker as you are essentially making 13 payments per year instead of 12 (bi-weekly = 26 half payments = 13 full payments). However, these notices usually have a catch in that the servicers generally charge a fee to set up these bi-weekly payments for you (or they charge an ongoing processing fee). Remember, loan servicers are typically striving to put more money in THEIR pockets, not yours.


If you want to accelerate the payoff of your loan by making extra loan payments, great! But, you can do this on your own. If you decide to make extra payments, just make sure you indicate your intentions to have this extra money go toward principle at the time you make the payment.


Let’s dive deeper to see if bi-weekly payments are good for you.



  • You can pay off your home quicker
  • You save thousands in interest
  • It is easy to implement



  • Loan servicers usually charge a fee (but you can do it on your own)
  • You may have better places to put the extra money (see below)



  • Payoff debt (especially consumer debt like credit cards, student loans and car loans)
  • Beef up your emergency savings
  • Contribute to retirement accounts (maybe your 401k at work with the company match)
  • Save for other goals (house down payment, kids’ college education, etc.)


Contact us if you have questions regarding bi-weekly mortgage payments, or any other topic related to home financing.