You Could be Rewarded for Good Behavior
If you're planning on a real estate purchase in the near or distant future, it might be worth taking a look at your bill-paying habits. You might be rewarded for your good behavior. When it comes to credit, are you a "transactor" or a "revolver?"
With upcoming changes to the mortgage credit report by Fannie Mae, these terms could mean the difference between getting accepted for a mortgage, or not.
A transactor is someone who pays their credit card bills in full each month, or pays on time and exceeds the minimum requirement.
A revolver is the person who only makes the minimum payment, allowing balances to constantly roll over to the next month. They may also have several accounts on the go.
This conclusion seems a long time coming, but research suggests that revolvers are a higher risk due to their accumulation of unpaid balances. Transactors, on the other hand are a lower risk. In the past, credit reports only indicated whether an applicant was late on payments or defaulted on a loan, but they didn't indicate monthly payments, or trends for responsible credit behavior.
Beginning June 25, this data will be available and incorporated into Fannie Mae evaluations. Now, applicants will have their credit reviewed using two years of monthly stats when determining credit usage. This information will be used to contribute to the final credit score. Although it won't change the score, it might just tip the scales for a successful or unsuccessful mortgage qualification.
This is especially helpful for new buyers, or those who have a short history of using credit and generally come up with an incomplete report. By adding the parameter of credit usage, and whether you're a transactor or a revolver, it speaks to your credit management habits. This is a big change in an industry that hasn't changed much in the way they've been doing things for the past 25 years.
Posted by Tim Shepard - Broker on
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