Do you know enough about this important recent development in credit reporting?
This is another question we received previously when we held our "Ask The Consumer Credit Attorney" webinar through OriginationPro's Certified Mortgage Advisor Program. This webinar featured guest speaker Bob Willis, attorney and founder of Credit Repair Resources. The question is: I have heard that Fannie Mae is going to use trended data in scoring models. What is trended data?
Trended data, otherwise known as “Time Series Payment Data”, is a very important recent development in credit reporting. For as long as credit reporting has existed, consumers that carried only one or two credit cards and paid them off before their due date suffered the consequences of not carrying a balance for the bureaus to measure and score.
Consumers have been aggravated because they do not want to carry balances or open new credit just to have a better credit score. That is scheduled to change in 2016. Recently, the credit reporting agencies have begun tracking the amount of the payment made even if the payment was made before the statement date. This allows tracking of all activity and greater predictability of likelihood that a consumer will meet their obligations.
Therefore, those that charge up their cards and pay them off before their due dates will get credit for being so savvy with their finances. The bureaus will now be able to identify if someone is a transactor (someone who pays off balances every month) or a revolver (someone who makes small or minimum payments). Transactors are obviously a lower risk, and will soon have a credit score that identifies and rewards them for this behavior.
--Dave Hershman
Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at [email protected].
