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Trending Data - Credit Reports

Q: Is it true that mortgage lenders may now look at whether a mortgage loan applicant pays off his or her credit card in full or carries a month-to-month balance?

A: Yes. Credit rating agencies recently began offering "trending data" on potential borrowers. Trending data provides a comprehensive picture of borrowers' debt management, including whether or not they pay off their credit card statement each month.

The change was based largely on a study by Fannie Mae, which found that borrowers who pay off their credit each month are about 60% less likely to become delinquent on a mortgage than those that only pay the monthly minimum. Although the use of trending data is still in the early stages, it is likely this will become a regular step in the mortgage underwriting process.

Still, it remains unclear whether the change will lead to a greater overall acceptance or denial rate for potential borrowers. On one hand, the change means that individuals with an otherwise borderline approval rating may be pushed over the hump because of favorable trending data. On the other hand, some borrowers who otherwise would have qualified may not qualify because they do not pay off their full credit card balance each month.

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