Fannie Mae to Start Looking Further Back at Credit Histories

The New York Times reports that when evaluating home loan applications, they will soon begin to look further back into consumer credit histories. As the article describes, "beginning mid-2016, Fannie Mae will require lenders to use what is known as 'trended credit data' when submitting loan applications through the agency's proprietary automated underwriting system." So what does this mean for potential borrowers?

Image Courtesy of The New York Times

Well, as the Times describes, the trended data "will provide more of a credit chronology. It will go back 30 months, showing whether payments were made on time, and more important, whether borrowers tend to carry balances from month to month, pay more than the minimum or pay off balances in full." 

While this implementation could have a potentially positive impact, allowing for "smarter mortgage lending" and a clearer consumer history, it is also important to note that "it won't work to all borrowers' benefit" because it can potentially reveal negative details from further back in one's credit history.

Credit Building Tips for Millennials

Are you looking to get your credit in order in order to prepare for a future mortgage? Here are a few "do's" and "dont's," courtesy of Ken Chaplin from REwired:

Do's:

1. Have your landlord report your on-time payments.

2. Use a low-interest credit card for minor purchases and fully pay it off each month.

3. Ensure you pay student loans on time each month.

4. Fix late payments as soon as you can.

5. Obtain your free credit report each year to monitor your credit.

6. Have patience -- good credit doesn't happen overnight!

Don'ts:

1. Skip payments for utilities.

2. Buy a car beyond your needs - skip the add-ons and luxury options until you're financially secure.

3. Sign up for credit cards you don't need. 

4. Have a big balance on any of your credit accounts.

5. Close old credit cards.