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NEW SCORES LET LENDERS GET NOSY

A new way of evaluating borrowers' risk includes using data from cellphone and utility bills.
Published Nov. 28, 2011

Getting a mortgage might become a little more intrusive as some lenders will probe more of your personal information next year. - Payment histories on child support, payday loans, rent and evictions could factor into some loans starting in March. Utility bills and cellphones could follow. Fair Isaac Corp., the developer of the FICO credit-score, and data provider CoreLogic have teamed to provide the additional score for lenders. - FICO scores, the basis for determining risk in mortgages, are based on a person's credit history. The lending industry lost billions on bad mortgages when the housing market burst. The new score will help lenders dig deeper.

Mortgage officers in the Tampa Bay area are against consumers being graded further.

"I think it's a bad idea to develop a new score," said Andy Wood of American Mortgage Services in Tampa. "We only care about items that are late 30 days or more. We get enough information from the credit bureaus."

Joanne Gaskin, director of product management global scoring for FICO, said lenders are asking for the information to ensure that loans are given to qualified borrowers. Consumers will be allowed to see the data and file disputes just like with credit reports, she said.

"It is needed," Gaskin said. "The more information lenders have will give them an opportunity to evaluate the applicant."

The FICO score, which ranges from 300 to 850, factors how long borrowers have had credit, how they use it and repay it. The score also considers judgments or delinquencies.

The new scores won't prevent a borrower from obtaining a mortgage backed by Fannie Mae, Freddie Mac or the Federal Housing Administration, which back most mortgages in the United States.

The scoring model could be a double-edged sword for consumers.

Borrowers with dismal payment histories for cellphones, utilities and payday loans could pay higher interest rates or be required to have larger down payments.

But factoring in nontraditional accounts could provide important help to buyers with damaged credit scores. It could also help millions of consumers who have minimal files with the national credit bureaus, Equifax, Experian and TransUnion,

Mortgage giants Fannie Mae and Freddie Mac say they'll accept alternative credit data but have restrictions on what they will use to boost a score. FHA, for example, does not permit applicants with low credit scores to boost them by adding positive, nontraditional data like cellphones and utilities.

Alan Lucas, a senior loan officer at BB&T in Tampa, said the accounts that will be scored are not revolving credit and should not be used for mortgages.

"This is a bad thing for borrowers," he said. "It will only tighten the lending. FICO has no business doing this."

Information from Times wires was used in this report. Mark Puente can be reached at mpuente@tampabay.com or (727) 893-8459. Follow him at Twitter at twitter.com/markpuente.

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