Great information for home buyers if you know anyone looking to buy a home make sure they read this. There are big changes in the credit scoring models and “boomerang buyers wait times” coming that will put many of your sales prospects in play next month. Medical Collection Accounts The formula for calculating the most widely used credit scores will soon change to lessen the impact of bad medical debts and ignore old unpaid debts of any type that are later paid off. It’s important to note that FHA is (currently) not requiring any medical collection accounts to be paid off to close escrow, but Fannie and Freddie do require accounts with less 4 years to be paid! More than half of all bad-debt collections on credit reports are associated with medical bills, according to a study by the Federal Reserve Board. The median FICO score for consumers whose only major black marks are unpaid medical debts is expected to increase by 25 points PER ACCOUNT. If the borrower has multiple collection accounts you could see their score jump 50-75 points just with the new change coming September 1st. In addition, the new scoring model for the first time will ignore old (all accounts) debts with a zero-dollar balance. It actually acts as an incentive for consumers to work with collection agencies to try to get their debts settled or paid, because they could see a considerable jump in their credit scores. For those buyers who have charge offs and collection accounts over 4 years old, those collections will not have to be paid off. Editors Note: Collection accounts and charge offs over 4 years do not impact credit scores under either the new or old scoring models. Rental Histories Experian and TransUnion announced recently that they are teaming up with Rent Track, a service that enables tenants nationwide to pay their rents online and have their monthly payments included in Experian credit reports. Landlords can participate easily by sign up online to begin receiving rent checks click here to see how it works. TransUnion also released a new research study that showed how the inclusion of rental data can raise consumers scores. When their monthly payments were reported to the bureau by landlords, nearly 20% of renters saw a 10-point increase or more in their score after just one month. Experians own study concluded, 59% of renters credit scores jumped. Foreclosure after Chap. 7 Bankruptcy Previously buyers were double penalized when they declared BK and then had thier home foreclsosed upon. Then many had to wait (up to) years for the lender to foreclose, all the while waiting in limbo for the time clock to re-start in order to repurchase a future home. Effective now, the re-start clock starts ticking at the Chap7 discharge date, regardless of when the bank actually took back the property. This new rule does not apply to Chap 13 filers or homeowners (with Chapter 7) who reaffirmed the mortgage and then fell into short sale/ foreclosure.
Posted on: Mon, 18 Aug 2014 18:03:51 +0000
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