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.

On October 24, 2022, FHFA announced the validation and approval of two new credit score models, FICO 10T and VantageScore 4.0, for use by the Fannie Mae and Freddie Mac (the Enterprises). Once implemented, lenders will be required to deliver both FICO 10T and VantageScore 4.0 credit scores, when available, with each loan sold to the Enterprises. FHFA also announced that the Enterprises will change the requirement that lenders provide credit reports from all three nationwide consumer reporting agencies (CRAs). Instead, the Enterprises will require lenders to provide credit reports from two of the three nationwide CRAs.

On March 23, 2023, FHFA provided an update on the Enterprises’ implementation plans and opportunities for stakeholder engagement. FHFA and the Enterprises are working to ensure a smooth transition to the new credit scores and the new credit report requirements, in a manner that avoids unnecessary costs and complexity.

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.