Fannie Mae is introducing a new format for credit reports called “trending credit data”. Typically a credit report shows more of a snapshot of what someone’s credit looks like today with late payments as a summary, more or less. Fannie Mae’s “trending” report will actually show a detailed 24 month history of each payment and the balance of that account for every month for the last 24 months.
Fannie Mae claims that this will be an improvement for borrowers who lack traditional credit and that this will not impact credit scores. However, with how underwriting systems are currently so credit score focused, I wonder how “trending” credit reports will help borrowers unless guidelines are revised to give credit scores less meaning.
Fannie Mae’s release notes for version DU Version 10 state that:
“The trending credit data will be used to evaluate the borrower’s ability to manage revolving credit accounts. A borrower who uses revolving accounts conservatively (low revolving credit utilization and/or regular payoff of revolving balances) will be considered a lower risk. A borrower whose revolving credit utilization is high and/or who only makes the minimum monthly payment each month will be considered a higher risk as it indicates the borrower may have trouble making payments in the future”.
Trending credit data reports will show if a borrower made a large payment on an account on month or was over the credit limit 21 months ago.
Fannie Mae DU Version 10 will be released during the weekend of June 25, 2016. So far, I’m not aware of Freddie Mac requiring a “trending credit” report… I won’t be surprised to see Freddie follow in Fannie’s footsteps.
The credit bureaus have been preparing for this significant change. Equifax and TransUnion will be ready to provide trending credit reports in time for Fannie Mae’s new guideline changes in June. Experian says they won’t be switching to trending credit data until 2017. We anticipate that we will start seeing the new trending credit reports later this month.
It’s really too soon to tell how this may impact transactions.