Credit scores affected by negative information will be a mandatory alert on loan applications for home mortgages beginning Jan. 1.
Credit scores, a number representing a persons credit-worthiness, is used by banks as a basis for loan amounts and interest rates. The new disclosure, prompted by Congress to make credit scores and loan pricing more consumer friendly, requires any negative information that will reflect higher rates or adverse terms be made aware of to the buyer.
Lenders will be required to alert applicants before mortgages are finalized in order to allow the buyer to reconsider or to look at their credit scores for inaccurate or out of date information.
Credit scores are notoriously confusing, based on three different numbers from three different credit bureaus. The U.S. uses FICO, Experians Plus, and VantageScore. FICOs score ranges from 300-850. An applicant with a score below 600 is considered a high risk lender, average at 640 and excellent above 720. Experians Plus uses a numerical range from 330-830 and VantageScore 501-990.
According to Credit Karma, an online provider of free credit scores, average scores fell 5 points from January to November in New York, from 688 to 683.
