Should I pay down my mortgage?
In the old days (much of the last century), many people stayed in their homes for 30+ years, long enough to pay off their mortgages and live mortgage-free ever after.  In the more recent past, mortgages became transient instruments, remaining in existence barely longer than a subatomic particle, long enough only to get to the next cashout or rate/term refinance.

Fair Isaac Corporation is finally rolling out the latest remake of its FICO credit score, which is the scoring standard for mortgage lenders.  Yes, it has taken until 2009 to get FICO ‘08 launched, and even now many consumers, potential homeborrowers in particular, may not be affected by it for some time.

For one thing, the three major credit reporting agencies are not all simultaneously jumping into the FICO ‘08 waters.  TransUnion will be first to adopt the new scoring regime. Equifax is expected to follow later this year.  Experian, the last of the big three bureaus, is a whole different kettle of cod. More on that later.  Another thing is that, even though a reporting agency may be offering the new score profile, a lender can ask for a score based on the original FICO methodology and many will do just that.

A lender who has been happy with the results from using the old FICO or who have not fully tested the new version will likely stick with the original for some period of time.  Fair Isaac claims that this latest tweak of its FICO scoring model will bring a big improvement in the power to predict creditworthiness.  It does this by adding new predictive variables and by dicing consumers into a greater number of risk profile groups.

The new generation of FICO should better address consumers who have “thin” credit histories (few credit accounts) and those with young files (few years of credit history), says Fair Isaac.  The new FICO score retains the same 300-850 scoring range, score reason codes, minimum scoring criteria, and treats creditor inquiries as in previous versions.

When first announced, FICO ‘08 was committed to ending a practice that enabled individuals added as authorized users of a credit card to get the benefits of the good credit history of the card holder, a practice called “piggybacking.”  Now, Fair Isaac says that, rather than ending the practice outright, it will help lenders protect against authorized-user account piggybacking by incorporating new technology that it says will materially reduce the potential score impact associated with the abuse of authorized user accounts.

Will the new scoring approach be better or worse for consumers? Both.  As they get shuffled into new risk profiles, some will surely see higher scores, while others will see lower ones.  Okay, so what is happening with Experian and your FICO score?  Right now, Fair Isaac and Experian are in a spitting match (technically, antitrust lawsuit) and Experian’s latest move has been to deny Fair Isaac the ability to sell Experian-based FICO scores at myFICO.com.  That has been the only place you could buy an Experian FICO score.  Oh, you can buy a credit score at Experian.com, but don’t be fooled; it won’t be a FICO score, so it won’t tell you what you need to know if you are in the market for a mortgage. 

Since, at present, you can’t buy an Experian-fueled FICO score on your own anywhere, the best alternative is to ask your Loan Officer to run it for you.  Doing this will also allow you to find out whether improving your score will save you money or help you qualify for better mortgage programs.  It also may get a tip or two about ways to improve your score if you need to.

Alex Echeandia of Choice Finance^®

Is this you?

Visitor: I bought a condo at 220K in 2006 when the price was high. Now, the value is really depreciated, I have a conventional fixed 15 years and I would like to refinance with FHA but no appraisal since the price in 2009 is really low
Visitor: MD 20705
Choice: fha streamline w/NO appraisal is for borrowers who are already in an fha loan
Choice: there might still be help for you given the new legislation for borrowers like you
Choice: we should know more on Friday
Visitor: so I cannot refinance then? because the price is reduced by 80K, and this is not fair
Visitor: and I still pay for 220K, is there no solution for that ?
Choice: there might still be hope for borrowers like you due to the new legislation for people who don’t have enough equity to refinance.
Choice: affordability and stability plan
Visitor: so something will happen this Friday, I mean tomorrow?
Choice: hopefully. we can contact you if that’s the case and then let you know if you qualify
Visitor: could you keep my email, and contact me pls
Choice: There may be help on the way very soon.  Contact me with your situation and I’ll keep you on file.  If circumstances are created where you are able to refinance, given your lack of equity,
I will contact you immediately to to start the process. 
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Josh Burley, Choice Finance^®
301-881-8900, ext. 125
888-475-0700, ext 125