H.R. 898 is a bill that might seem inconsequential on the outside with a description including: “To require Fannie Mae and Freddie Mac to establish procedures for considering certain credit scores in making a determination whether to purchase a residential mortgage, and for other purposes”, but might have a giant impact on the ability for younger individuals to purchase a home.
If it becomes a law, it will essentially free up Fannie Mae and Freddie Mac, guarantors for millions of government-backed mortgages, to look at factors other than credit score when deciding whether or not to guarantee a loan. As it stands now, the companies use traditional FICO scoring and require a minimum credit score to qualify for a loan (you can find your credit score for free here).
Younger borrowers may not have had ample time to build up their credit to the point where they can qualify for the best rate, if they qualify for the mortgage at all. At the same time, FICO scores have a memory of 7 years, drawing on information from your credit report, that some critics describe as unduly harsh. This comes from the fact that something bad on your credit that happened 7 years ago still affects your credit score, regardless of where you are in your life right now.
The Fair Isaac Corporation, which wields a virtual stranglehold on FICO scores for mortgages, has actively lobbied against this exact same bill in the past, along with other bills designed to help young and lower income individuals obtain a mortgage.
FICO doesn’t want the government to look at other factors besides your FICO score when determining if you should get a mortgage. According to OpenSecrets, they have spent nearly $700,000 over the past two years lobbying against this bill (submitted in the last Congress) and were successful in getting it shut down.
They seem to be gearing up again to fight this bill tooth and nail. With a Republican sponsor, you might think the bill has a good shot at becoming law, but more than likely, FICO will open its wallet to the politicians charged with keeping this bill off of the floor and we may never even see a vote on it.