Homes
Lessons From a First-Time Home Buyer: How FICO’s New Tool Could Benefit Mortgage Applicants
Applying and getting approved for a mortgage can be a lengthy process. As I learned, this is especially true if you’re self-employed — but it could also be a challenge given your credit situation. On that note, FICO is apparently rolling out a new tool to mortgage lenders that will hopefully enable them to give applicants more specific advice and direction while working to provide them with more and better options.
Earlier this week, FICO introduced its Score Mortgage Simulator. With this tool, mortgage professionals (such as brokers or lenders) can get insights into how an applicant’s credit could be impacted by certain activities. For example, they may be able to see what your credit score would be if you paid down credit card balances or had a collection account deleted from your report. Then, they can pass this information on to consumers so that they can weigh their options and take action if needed.
Importantly, what sets this tool apart from similar third-party options is that results are based on actual FICO algorithms rather than estimations. This is extremely helpful as it means that borrowers can be confident that taking the recommended steps will get them to where they want to be. Plus, while this insight is good to have when applying for a mortgage, it is also great info to have as consumers make subsequent personal finance decisions.
Even as someone who has good credit, given my experience working with a mortgage broker, I can absolutely see how such a tool will be helpful for homebuyers. In our case, our broker was using tools to see what pieces of our application could prove problematic before finding interested lenders. So, I can only imagine how it would be a similar story for those applicants seeking the best rates and who, in turn, want to increase their credit scores in the most effective ways possible. To me, this sounds a lot better than being forced to settle for less attractive options or being declined outright once your application is submitted.
Of course, while it’s great that FICO is offering this tool to mortgage professionals, I do wish that a consumer version (and preferably a free one) were also available. Luckily, while they may not have FICO’s algorithms, there are other credit simulator tools you can try to hopefully get a ballpark idea of how you can improve your credit. One such option comes from Credit Karma while the other can be found on WalletHub.
On the plus side, both of these platforms can be used for free. However, it should be noted that Credit Karma and WalletHub rely on VantageScore 3.0 data rather than FICO, so the scores you see may not exactly reflect what lenders see. Then again, with so many different credit score models and algorithms, it’s hard to know what score will pop up for various creditors anyway.
Overall, the FICO Score Mortgage Simulator sounds as though it could be an outstanding tool for mortgage brokers, lenders, and (most importantly) prospective homebuyers. Thus, I really hope that professionals quickly adopt this new tool and start putting it to work helping customers. With interest rates likely to slowly come down, I suspect more first-time buyers will be entering the housing market soon — so hopefully this simulator will be there to help them get the best deals when they do.
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