@Anonymous wrote:Yikes. I am really hoping that this is all a very simplified explanation of how this is analyzed. I took out some accounts that are considered 'store cards' i.e. Ashley, and these cards were used to purchase home goods. I am taking advantage of the promo periods. I would hope that there would be some analysis of these scenarios.
I don't think it's going to make much practical difference unless they retool the process. One's rate is determined before your application even sets foot into DU, and that's all around FICO score, type of loan, type of property, and downpayment... and basically nothing else when we're talking the tier sheets.
What may occur is there will be updated guidelines for automatic underwriting vs. refer (refer is basically forced to manual underwriting which is suboptimal for everyone including us the consumer) and maybe some transactors skate through on otherwise forced to manual files, or vice versa. Hard to say on that one, but Fannie is still under conservatorship and it's highly unlikely that something ugly for consumers would be present in the current political environment.
If anything it'll probably make it easier, so in your case you should be no worse off than before.
@Anonymous wrote:I don't know how accurate or reliable this source is, but it is from a loan officer blog, and looks like TU and EQ collect the data on monthly payment amount (which I have seen on my credit reports when I pull my free annual ones) and you do not need to let a balance report for them to see that you are a transactor using the card.
An ongoing challenge has persisted for consumers that don’t carry balances on their credit cards. The most diligent borrowers tend to pay off card balances before their statement dates to avoid paying interest. Although this is a sound financial practice, keeping a zero balance on a credit card does not show activity on a credit report, therefore limiting the benefit or scoring impact of that account.
An emerging type of data gathering called trended data or “time series payment data” is changing this. Equifax and TransUnion now have the ability to collect payment information from data furnishers even if there is no balance on the card at the time of reporting. The amount paid monthly on a card can now be collected and furnished to DU to be used in its decision making process.
Here is the website with the full article: Transactor info
I'm applying to refinance my mortgage into a conventional loan in April - I pay most my card balances before the statements cut, carry a balance on 1 that has 0% interest. I'll give a data point then on if I can find anything out about this.
The trended data has gone back years, even as early as 2011 EX had it and they were the first to my knowledge.
Most people don't pay before the statement date, most pay before or at the due date as there's a month's grace period on charges anyway on most credit cards (other than the deep subprime ones or cash advances or similar things). I didn't read the article but from what I assume you quoted, the author got it exactly backwards. An account with $0 month after month is no problem score wise whatsoever; however, people that have a non-trivial balance (paying in full at the due date) reported and take a ding on their FICO scores as a result, are a different animal than people who are revolving balances even if it's identical dollar amounts according to their data, but FICO sees and scores the two identically on the revolving utilization metrics... so Fannie et al. are going to start addressing that.
I don't know if they're going to be able to get the trended data from everyone, not all lenders have done it in the past, and some have stopped doing it too... Fannie's one of the elephants in the financial world though, so maybe they can get everyone's buy in.
Where the $0's come in is for FICO and it's damned all $0 penalty when clearly we've been using the cards... the hope is in FICO 10 or whatever to throw us a bone and use the trended data to determine credit activity, but somehow I don't think it'll get in there, we're way too small of a subset of the population: most savvy people, and most who don't know otherwise, take to the due date... as doing otherwise is just giving the bank 30 days interest instead of your earning that.
@Anonymous wrote:The article doesn't say that most people pay their balances before the statement date - it says the most diligent. The FICO score taking a hit from this was a reference to all credit cards reporting a $0 balance - which we already know to be true.
The article goes on to say that not all companies report payment data.
The author also explains that the trended data started out as a sales pitch for credit card companies to better target consumers - that applying the data to this use in this industry is new, but the data has been being collected already.
The point of the excerpt was that it says the transactor v revolver classification is taken from the reported monthly payment data - which is reported even if there is a zero balance. So a balance does not have to report for 'transactor' label to be given to cards, as long as the card reports payment info. Anyone who pulls their free annual credit reports can see which cards report the monthly payment information, and can continue to pay balances before statements on those cards if that is their habit.
Like I said, I don't know how reliable the LO that is the author is - but your comments didn't relate to things said in the article, or were addressed so clarified.
Please re-read what I said, including the part where I stated I was just addressing what you pasted, and I would suggest a reasonable assumption is that you had pasted the relevant parts of the article in question. But for reference on the opening part of your message:
An ongoing challenge has persisted for consumers that don’t carry balances on their credit cards. The most diligent borrowers tend to pay off card balances before their statement dates to avoid paying interest. Although this is a sound financial practice, keeping a zero balance on a credit card does not show activity on a credit report, therefore limiting the benefit or scoring impact of that account.
That is not a challenge, and that is wrong on multiple fronts: it is a sloppy statement. I didn't say you were wrong, I said the text you quoted was mistaken, or backwards as I termed it referring to what I might've wrongly assumed was the premise based on what you quoted. If I misinterpreted your post that's on me and I do apologize if so, but the fact is that the above statement is irrelevant as to the reason Fannie et al. is implementing the transactor change which argues the source material is lacking in quality.
I have little intention of reading any article when the excerpts someone posts invite serious criticism on basic points of this industry, especially as you suggested you weren't certain how reliable it was, and I simply replied with an explanation that it wasn't very.
The rest of it, this is a forum and we're not always going to have the same viewpoint but the least we can do (and is mandated) is be respectful to each other.