Credit Policy Overview

The credit and lending communities and federal regulators should reassess the entire credit structure and look for ways to increase the availability of credit to qualified borrowers who are good credit risks. The inadvertent response to the "risk layering" inherent in some mortgage products (e.g. no doc, balloon, negative amortization, or "teaser rate" mortgages) during the financial crisis has been "safety layering" where so many safeguards are being imposed that there is little risk to making new loans.

NAR supports the general principle that all mortgage originators should act in “good faith and with fair dealings” in a transaction and treat all parties honestly. NAR’s Code of Ethics already imposes a similar requirement on REALTORS®, who are required to treat everyone in the transaction honestly. Read NAR's Responsible Lending Policy.

Credit Scores and the Impact of Foreclosures and Other Credit Problems

Many REALTORS® have questions about FICO scores and the impact of various adverse credit events on the score. A FICO score is a credit score computed using proprietary formulas of the FICO Corporation (formerly called Fair Isaac), but there is not just one FICO score. Read the FAQs below to learn more. Furthermore, there are other credit scoring companies such as VantageScore with its own scores.

Fannie Mae and Freddie Mac (GSEs) currently only use an old version of FICO and do not use credit scores from competitors like VantageScore.  NAR successfully lobbied the FHFA to revisit this policy and in 2020 the FHFA released a new framework for the GSEs to review new credit scores for their viability as an underwriting tool and to provide a public review process, with public comment, and a finite timeline for adoption or rejection. The GSEs have only reviewed the older FICO score they currently use, but are expected to review and add additional scores in the future. These alternative scores vary in attributes but have advantage such as using alternative credit data such as utility and telecom payments or rent, or the score may reduce the value of medical debt payments.

NAR has also prepared a chart showing the impact of various adverse credit events on the ability of consumers to purchase another home with a FHA, Fannie Mae, or Freddie Mac mortgage.