A key element in the current FICO model is the “debt utilization” ratio. Simply put, the less debt you carry, compared to your available credit limits, the better. Under the new FICO 10 model, this ratio will become a larger influence on your score, primarily in the evaluation of credit card usage and unsecured loans.

Another aspect of FICO 10 is the use of “trending debt” scoring. This will consider whether your debt load has increased or decreased during the past two years. If you have reduced your debt during the past 24 months, your score will improve under the new calculations. But if you have increased your debt obligations, your score may drop by 20 points or so, even if you are making on-time payments.

FICO says that its new scoring model helps lenders identify high-risk debt patterns, which can lead to loan defaults and bankruptcies. Making on-time payments still matters, of course, but indebtedness levels and debt accrual habits are under greater scrutiny than ever before.

According to industry reports, FICO 10 will not be used in Freddie Mac and Fannie Mae mortgage underwriting in 2020. But as a rule of thumb, home buyers should avoid increasing their debt loads and pay down their debt obligations wherever possible. This will improve your credit score under FICO 10, and save you money in the long run!

As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Exclusive Buyer’s Broker, CEBA-M, MCNE, CSP, PSA,e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services www.BuyersHome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax

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