The trouble with the old formula is that it does n’t reflect some of the more consumer-friendly changes that have been introduced in the newly formulas for other credit scores. As a result, the old rule may give some borrowers lower scores, says John Ulzheimer, a credit adept .
For example, medical debt is counted less heavily under newer FICO scores, compared with the mortgage rule. similarly, debt collections that have been paid off, which are not counted in newer score models, can distillery weigh against consumers under the classic FICO convention, says Chi Chi Wu, a staff lawyer at the National Consumer Law Center, a nonprofit group .
mortgage accredit scores can besides be more unmanageable to improve. New programs such as Experian Boost and eCredable Lift allow consumers to add payments for utilities and rend to their credit reports, which can help their scores if they have thin or hapless credit rating histories. But these payments are not counted under the old mortgage formula.
As a leave, it ’ s not storm to see differences of 20 points between the FICO sexual conquest used by mortgage lenders and other credit scores, according to Joanne Gaskin, vice president, score and analytics, at FICO .
You besides may have less time to shop for a mortgage without hurting your credit. Newer credit formulas give consumers a 45-day denounce window, when multiple accredit requests by lenders will count as a single question. That ‘s important because having besides many requests for your citation grudge can actually lower the score ; a high number of inquiries may indicate you are a riskier customer.
But that window is merely 14 days for the mortgage score issued by Experian, one of the three major credit chest of drawers that generate credit scores. That means you may have to shop fast .
“ It ’ s kind of deplorable that the best advice says consumers should shop around to get the best deal, but that shopping could cause you to ding your credit score, ” says Lisa Rice, president and CEO of the National Fair Housing Alliance, a nonprofit group.
Access to credit for base buy has been a longstanding challenge for people in low-income communities, specially consumers of color, says Rice, who sees an pressing need to update the mortgage credit score .
last summer the Federal Housing Finance Administration ( FHFA ), which oversees Fannie Mae and Freddie Mac, announced that it would consider alternative credit scoring formulas. But that process could take several years, says Gaskin .
Until a new convention is approved by FHFA, however, the old recipe remains in use .