More Mortgage Loans for People who Pay Off Credit Cards Monthly
Until recently, when a potential lender evaluated your credit report, they could see whether you made payments timely and whether you had defaulted on any loans. Your lender could not figure out if you were a “revolver” or a “transactor”. What does the mean? Well, a “revolver” is a person who makes minimum payments on debts, such as credit card debt, and continues to roll the debt forward. A “transactor” is someone who pays off their bills – and we’re mostly referring to credit cards – in full every month. Basically, until recently, the lender could not tell if you were paying your credits cards in full every month, or just paying minimum payments. Analysis done by the credit industry suggests that transactors are less likely to default on mortgage loans.
Effective June 25, 2016, though, things changed. Fannie Mae, who purchases many loans, required that mortgages presented to them will need more detailed credit reports, showing whether the potential borrower is a transactor or a revolver. They want to see two years of continuous data, and two of the credit bureaus, Equifax and TransUnion, have already agreed to provide it. This new level of evaluation will give people who pay off their debts in full every month more access to mortgages. It will also open up loans to people who don’t have a lot of credit history, but do pay off all the credit they do have monthly.
Freddie Mac is considering a similar approach as well!