Skip to main content

Bucking the Trend(ed) (Posted June 6, 2016)

Later this month, Fannie Mae will start requiring Trended Credit Data (TCD) as reported through Equifax and Transunion.  At present, this will not affect FHA or VA loans – but that could change.  So, what is Trended Credit Data, and how will it affect you?

While Fannie Mae, Equifax, and Transunion all use English words to define TCD, the definitions are very long winded and boring, so let me cut to the chase: it means that rather than looking at your credit score as it stands on the day it’s pulled, TCD goes back 24-30 months to examine your credit “behaviors”.  The long and the short of it is this: if the “trended data” shows that you have a large credit card balance, and you pay it in full each month, you have a higher level of credit worthiness than someone who has a large credit card balance and only pays the minimum required amount each month.  Are you with me so far?
 
There are a couple of big ramifications of this new policy, of course, but let me point out one of the most obvious ones: gone are the days of getting bigger near-instantaneous bumps (upward) in your credit score when you pay down a loan or pay off an outstanding credit card balance.  The reason being that now the credit score will be based on how you’re been “trending” for the last 24-30 months: if you’ve been paying the minimum amount on your credit cards for the past two years, making one big payment to wipe out the balance is going to be significantly “downgraded” in importance because you have 23 prior monthly payments showing a completely different behavior.  Buckle up because it gets . . . more interesting.

As part and parcel to this new policy of TCD, the nation’s largest property management company has convinced Equifax and Transunion to include late payments of HOA dues to be factored into a person’s credit score.  Yes, you read that correctly.  And you know that every other property management company, big and small, will follow suit shortly.  The positive side to this is that since it’s going to be viewed through the TCD lens, this means that it will take 12 months, at least (but hopefully longer), to establish a “trend” before it can be included as part of the Trended Credit Data.  For this reason, coupled with the fact rates are as low as they are, now is the time to start looking for that next home purchase – waiting will only give the credit folks time to build up their trended data, and there’s never a guarantee with the rates. 


As for Fannie Mae requiring TCD, there’s no need to get unduly worried.  Will requiring TCD change the options available to you to obtain a loan?  It’s very likely depending on your current credit behaviors.  With that said, though, we have always had more options to present and pursue than other banks and brokers – and we’ll continue to buck the trend(ed). 

Comments

Post a Comment

Popular posts from this blog

Numbers Don't Lie, But Wherein Lies the Truth? (Posted November 21, 2016)

Said with enough conviction, you can make almost anything sound true.   Preface the fabrication with “according to a recent bi-partisan government study,” and you’re three quarters of the way to selling the lie to a lot of people.   Seriously, try this. The next time you’re at a dinner party or having coffee with friends, pepper this little tidbit into the conversation: “I read something really interesting the other day.   According to a recent bi-partisan government study – I think it took them three years to get it all done – middle-aged men who drive either a Toyota Camry or a Honda Odyssey have more testosterone than younger men who drive either a Ford F150 or a Dodge Charger.”   You’ll get some raised eyebrows and looks of mild disbelief, but don’t let that deter you.   Just lift up your hands, palms outward, and say, “I just think it’s interesting, and it makes sense when you think about it” – and then change the subject to something completely u...
Post a Comment
Read more

Couching Your Savings Correctly (Posted July 25, 2016)

I recently read an article online about a gentleman who set a goal to purchase a home and then mapped out very specific steps as to how he would reach that goal.   Personally, I was extremely impressed by his discipline and foresight.   His goal had two parts to it: save $150,000 for a down payment and purchase a home.   Before you choke on your coffee or spit soda through your nose, let me disclose here that the gentleman who is the subject of the article was purchasing a home in the New York City area.   Now that your blood pressure is returning to normal and you’ve spared your freshly ironed white shirt from staining, I’ll give you a breakdown of his plan: •   Starting in 2007, he looked at his annual salary and then took a look at the amount of credit card debt he was carrying; he cut back on as many expenses as possible so he could pay off that credit card debt in the first year.   Touché! •   He kept his lifestyle scaled back to the poin...
Post a Comment
Read more

Dumb as (or Smart as) a Box of Rocks (Posted June 27, 2016)

Obviously, you all want to know what Brexit means to the economy and the housing market specifically.   So do I!   But since my crystal ball is at the cleaner’s, let’s give the Brits and the European Union a little time to work out the terms of their separation and look at something else.   What’s a “fad ”?   With the help of Google, this is what I got as a definition: “an intense and widely shared enthusiasm for something, especially one that is short-lived and without basis in the object's qualities; a craze.” In April 1975, an advertising executive by the name of Gary Dahl invented the Pet Rock.   The idea came from his sitting in a bar with some friends who were complaining about the cost and time required to take care of various types of pets.   He marketed his “pets” by placing a rock in a box cut and shaped like one you would get at the pet store to carry home a puppy or a kitten.   Along with the box and the rock, a booklet was included...
Post a Comment
Read more