New FICO Index May Help More Borrowers Secure Mortgages
When it comes to securing a mortgage, one of the most important factors is your credit history. Lenders will evaluate your credit history—and, more specifically, your FICO score—to determine your eligibility and the terms of your mortgage.
Traditionally, a good FICO score would be enough to land a competitive mortgage. But in the current economic downturn, many lenders have tightened their restrictions, making it harder for borrowers to secure a mortgage.
But a newly launched credit score index (outlined in a recent article from realtor.com) aims to make it easier for borrowers to secure loans, including mortgages.
The FICO Resilience Index is a new credit score index aimed to help lenders assess a borrower’s ability to continue to pay their financial obligations during a financial downturn—regardless of credit score. The FICO Resilience Index places more weight on credit utilization and account balances versus the traditional FICO score, which emphasizes payment history.
The FICO Resilience Indes gives lenders an alternative way to evaluate borrowers—and may help some borrowers with less-than-perfect credit scores secure a mortgage in today’s economy.
“Our hope is that it will allow lenders to continue to be able to make prudent loans,” Joanne Gaskin, vice-president of scores and analytics at FICO, said in the article. “Lenders are going to feel more comfortable continuing to approve borrowers rather than denying [them].”
So, what does that mean for you? The FICO Resilience Index may help to expand mortgage lending—so if your FICO score has kept you from securing a mortgage, now may be a good time to evaluate your financial situation and reapply.