At the end of June of 2016 Fannie Mae will begin considering what’s being called “trended data” when you apply for a mortgage loan that is backed by Fannie. “Trended data” is a poorly conceived name for what’s really nothing more than the chronology of your credit card balances, payment amounts and minimum payment due. This new chronology of information is about to become very influential over your mortgage loan application process.
Why Credit Card Balances Matter
The reason Fannie Mae is going to start considering this new information is because it “allows a smarter, more thorough analysis of the borrower’s credit history.” That last quote came straight from a Fannie Mae release in February 2016. That’s code for “we will know more about your risk by considering this information.” The trended data being considered by Fannie is only going to be the most recent 24 months of your payment related activities on credit cards, nothing more.
In the past you couldn’t tell the difference between a credit card account that was paid in full each month and one that was not. But, with this new chronology of payments you will be able to easily tell the difference between someone who carries a balance from month to month versus someone who does not.
Why Is It Important
The reason the information is important is because people who pay their cards in full each month are, statistically, much less risky than people who carry a balance. So, even if you’re making your payments on time, just not the whole amount, you will be considered more risky than someone who pays in full.
Now, keep in mind that this information is not going to influence your credit scores. So, if you have a VantageScore of 700, then you’re still going to have a 700. If you have a FICO score of 650, you’re still going to have a 650. Trended data is not considered by credit scoring models…yet.
What Can I Do
If you pay your credit cards off in full each month then you don’t need to worry about anything. You’re already in the clear because you’re the lower risk borrower that this trended data is seeking to identify. If you do not pay your cards in full each month, then we have a little bit of a problem.
The fact that you don’t pay in full each month means you are riskier. And, the fact that you’re riskier could mean that whatever deal you’re approved for isn’t the best deal that you could have gotten if you paid your cards in full each month.
So, the strategy you need to employ is to pay in full each month. I know that sounds easy and it assumes everyone can simply write a big check and knock out their existing credit card balances. But, there’s really no other way around this new trended data issue. You can’t fool it. The only way to beat it is to not carry a balance.