New program will offer free credit scores to millions
Q. Several months ago, you wrote that a proposal in Congress would allow homeowners and other consumers to get a free copy of their credit score, just like they can currently get a free copy of their credit report. Did the bill ever pass?
A. No, the proposal is still languishing on Capitol Hill. But millions will be able to get their score for free anyway, thanks to a major decision by the company that pioneered the credit-scoring industry.
That company is FICO, which created the widely used scoring system with the same name in the 1980s. Earlier this month, FICO announced that it would allow any lender who uses its system to make credit scores available to consumers for free under a new program called FICO Score Open Access.
Two big credit-card companies — Barclaycard and First Bankcard — already have begun offering their customers free scores under the new program, and many mortgage lenders are expected to soon follow suit. The company forecasts that about 25 million consumers will have access to free scores by year’s end, with tens of millions more to be added in 2014 and beyond.
As a bonus, consumers also will be able to see the two primary factors that are affecting their scores, whether it’s too much debt, late payments or other problems that commonly drive scores lower.
Q. I heard a report on the radio that said that people who don’t have a college degree are more likely to own a home than those who do. How can this be, considering that most college graduates usually make more money?
A. The radio report you heard was based on a recent study by the Federal Reserve Bank of New York, which found that the homeownership rate is indeed lower among college grads than non-grads. It’s the first time that has happened since the Fed began keeping such records years ago.
There are a handful of reasons behind this rather surprising finding, the Fed says. For starters, the average grad walks away from college with $27,500 in student-loan debt. Mortgage lenders consider such debt when they review a potential borrower’s application, leaving many recent graduates unable to get a home loan.
College graduates’ chances of getting a mortgage are even worse if they have skipped payments on their student loans or defaulted, which depresses their credit scores. The weak job market for newly minted grads doesn’t help.
In addition, a growing number of recent graduates — 36 percent as of today — live with their parents. While that saves on housing expenses, it prevents them from building a good credit history through steady rental payments to a landlord.
Q. I have just returned from my second stint in Afghanistan and will retire from the Army in a few months. My wife and I would like to purchase our first home with a nomoney-down Veterans Administration (VA) loan, but we want to start a family first. Is there a time limit on my eligibility to get the mortgage?
A. No, there is no time limit on your ability to get a loan backed by the Veterans Administration. If you received an honorable discharge and can meet the program’s other requirements, you could get a low-rate VA loan with no down payment, even if you wait decades.
You can get more information about the VA’s home-loan program by calling the agency at 800827-1000 or by visiting its website,
www.va.gov. And as we approach Veterans Day, a grateful nation thanks you for your service. REAL ESTATE TRIVIA
The average American family spends about 23 percent of its household income on homeownership expenses, according to the Census Bureau, but it’s 20 percent or less in North Dakota, West Virginia, Indiana and Iowa.
Send questions to David Myers, P.O. Box 4405, Culver City, Calif. 902312960, and we’ll try to respond in a future column.