Just when you thought you knew all the ins and outs of how your credit score is calculated, it all changes. Last month FICO announced a new partnership with CoreLogic to create a new FICO score for use in the mortgage industry. While there are many credit bureaus that provide scoring on Americans, your FICO score is the report most widely used for mortgages. That’s because FHA and other government-backed mortgages use FICO as part of their means testing for approval. If FICO standards change, it could have a widespread effect on families looking for mortgage approval…
The addition of the CoreScore to your FICO will greatly increase a bank’s access to your personal finance information. The more doors that are open, the more doors that you will need to guard—even doors you didn’t know existed.
It’s not common knowledge, but seemingly unrelated aspects of your finances can get exposed through public information. Town ordinances and zoning are becoming increasingly restrictive in communities. There are plenty of local governments that can cite you for not mowing your lawn, leaving your garbage out on the curb overnight or owning one too many dogs. These types of local penalties may seem ridiculous and unfair, but they do have teeth. Many localities have the ability to place a lien on your property if citations remain outstanding. That means that it could get noticed by the new FICO score.
Failure to mow your lawn really could lead to a rejection on your mortgage application. The addition of the CoreScore opens the floods gates on financial information that was once unavailable to lenders.
From a lender’s point of view, having extra information is helpful. Yet, I wonder at the statistical connection between maintaining a lawn (and avoiding local fines) and paying a mortgage: are they always linked? Having too many pets/animals indicates less of a likelihood of paying a mortgage?
I wonder if there isn’t something else at work here. Given the increase in foreclosures, mortgage holders behind in their payments, and underwater mortgages, perhaps lenders are more interested in how well the home will be maintained so that if the lender does end up reclaiming the property in a few years, they don’t have to drastically reduce the price or spend money to fix up the home.
A last comment: the article suggests such local ordinances “may seem ridiculous and unfair” but there are at least two big rationales behind him. First, it is all about property values. You may want the right to keep garbage and junk on your property or return your yard to a more natural state but your neighbors could be negatively affected. Second, the uptick in foreclosures in recent years has pushed many communities to adopt stricter regulations as homeowners and banks don’t keep up some properties, affecting nearby property values as well as contributing to the appearance of social disorder.