HOME mortgage borrowers who've been frustrated by not being able to obtain - or understand - their credit scores are in for some good news: Two of the three national credit bureaus, plus the country's largest source of home loan money, plan to disclose credit-scoring information helpful to consumers beginning as early as this summer.
Credit scores have become highly controversial because they are kept secret from most loan applicants, but often are critical determinants of the interest rates and fees that homebuyers are charged. Lenders are prohibited from revealing scores to consumers, except those who are rejected for a loan.
Opposition to credit-score secrecy is increasing. Consumer groups are calling for more openness, and legislation has been proposed to require disclosures. In Congress, the Fair Credit Full Disclosure Act (H.R. 2856), sponsored by Rep. Christopher B. Cannon, a Utah Republican, is awaiting action. In the California Legislature, a bill is pending that would force lenders to provide mortgage applicants their credit scores.
But government intervention may prove unnecessary. Two of the three major suppliers of consumer credit data - Trans Union Corp. and Experian - plan to pre-empt legislative moves by offering new services designed to explain loan applicants' credit-risk ratings and offer advice on how to improve them. Perhaps even more important, the nation's largest supplier of home mortgage money, Fannie Mae, plans to cease using traditional credit scores on all home loans it purchases through its electronic underwriting system, as early as July. According to a Fannie Mae official, the giant company plans instead to evaluate the raw data in mortgage applicants' credit files using its own, proprietary rating models, and to provide borrowers with an independent assessment of their credit standings and needs.
The Federal Housing Administration (FHA) is also working on a replacement for traditional credit scores that, like Fannie Mae, would show borrowers where and how they need to improve their credit histories - if necessary - to qualify for mortgage money.
The net effect of all these moves will be to sidestep the current controversies over the most widely used form of credit scores, so-called "FICO" scores, named after their developer: Fair, Isaac & Co.
