Watch our no-cost recorded webinar about trended credit data!

Trended Credit Data and DU 10.0

Trended credit data is all the buzz these days. Some industry experts have gone as far as to call it the biggest thing to happen to credit reporting since the creation of the credit score.

So is it the next big thing, or will it have no impact? The answer seems to be somewhere between yes, no and we’ll see.

Why is everyone talking about trended credit?

Effective with Fannie Mae’s Desktop Underwriter® Version 10.0, originally scheduled for release the weekend of June 25, 2016 — but has since been pushed back, DU® will use trended credit data in the credit risk assessment:

  • Only on revolving credit card accounts
  • Only for the most recent 24 months’ payment history, even if the credit report provides more than 24 months of data

For 2016, it appears only TransUnion® CreditVision® and Equifax® Dimensions™ will provide the necessary data. Fannie Mae has said that Experian’s trended credit data is expected to be added at a later date, possibly early in 2017.

So what exactly is trended credit data?

As we know, credit reports have long evaluated consumers’ credit history, based in part on monthly factors such as the amount of credit card debt, the minimum payment amount and whether the payment was made. Trended credit data attempts to draw a clearer picture of just how much consumers are paying on revolving balances every month. Are they using the credit card to earn reward points? Are they transferring revolving balances between credit cards? Are they just paying the minimum payment due?

Trended credit data determines how individual consumers use credit and defines 6 types of users:

  • Transactor (a.k.a. “steady users”) — Pays credit card balances in full every month
  • Revolver — Carries credit card balances from month-to-month and often makes just minimum payments
  • Rate surfer — Transfers balances from one account to another seeking a better rate and makes the minimum or no payments
  • Consolidator — Transfers multiple credit card balances to one credit card or a consolidation loan
  • Nonactivator — Opens credit cards, yet rarely uses them
  • Seasonal user — Uses credit cards at specific times of the year, such as holiday gift buying or vacation spending

What most experts agree trended credit data won’t do is greatly expand the number of people who will qualify for a mortgage. Fannie Mae risk modeling predicts approximately a 1%-or-less difference in the number of borrowers who receive an Approve/Eligible finding.

Plus, the credit scores currently offered by FICO and VantageScore do not consider trended credit data, so there will not be an impact to borrowers’ credit scores — or at least not at this time. And that may be the operative phrase. What trended credit data could lead to is unknown at this time.

I’m hopeful that by providing a more granular view of consumers’ monthly spending and payment histories, trended credit data will help our industry make better informed decisions. And that is a good thing.

Watch our no-cost recorded webinar about trended credit data!

Trended Credit Data and DU 10.0

 

Vance Edwards, CMB

Vance Edwards, CMB - MGIC Marketing Program Director

Vance Edwards joined MGIC in 1999 and currently serves as MGIC's Marketing Program Director. Among Vance’s responsibilities is heading up MGIC’s Marketing Promotions Team which oversees MGIC sales training efforts, marketing of MGIC programs and co-branding efforts with MGIC customers.

In addition, Vance leads MGIC initiatives with Realtors and consumers, especially first-time homebuyers. He has spoken numerous times to Realtors® and loan originator audiences on topics including: first-time homebuyers, QM, economic overview, mortgage industry, and sales skills.

Vance lives in Menomonee Falls, Wisconsin with his wife Carrie and children Hailey and Trevan.

Vance is a certified FICO professional and earned a Certified Mortgage Banker ("CMB") designation from the MBA.

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