Trended Credit Reports
Fannie Mae has begun to use Trended Credit Report data in their credit risk assessment of the borrower. This new reporting mechanism provides the lender access to historical monthly data for 2 years on several factors including balance, scheduled payment and actual payment amount that a borrower has made on the account. This gives the lender a better picture of the consumer’s history on managing revolving accounts over the last 2 years. Credit reports currently used in mortgage lending indicate only the outstanding balance, utilization and availability of credit and if a borrower has been on time or delinquent on existing credit accounts.
If a consumer has a large credit card balance but pays in full each month, he or she would likely have a higher level of credit worthiness than the consumer with a large credit card balance but is only making the minimum required payment. Research has found the following:
- Borrowers who never exceed their credit limit are 75% less likely to be delinquent than borrowers who exceed their credit card limit in the last 12 months.
- Borrowers who pay off their credit card every month are 60% less likely to become delinquent than borrower who only make their minimum payment each month.
It is believed the Trended data will provide a more thorough analysis of the borrower’s credit history. It’s also believed to be a powerful predictor of risk and should be able to support access to credit for creditworthy borrowers.