CoreScore goes in to Effect

CoreLogic implemented its new CoreScore credit scoring model at the end of March. The CoreScore consists of 2 parts: The first is a report consisting of data that may not have appeared in conventional credit reports compiled by the top three credit bureaus (Experian, Equifax, and TransUnion). The second consists of a composite score based on the data in the CoreScore Credit Report combined with traditional credit bureau data and scores.

Examples of data that will now be available to lenders under the CoreScore includes missed rental payments, evictions, foreclosures, delinquent homeowner’s association dues, tax liens, child support judgments, credit card judgments, and even applications for payday loans. Much of this data is sourced from public records. In addition, the CoreScore will identify borrowers that owe more on their mortgage than the property is worth (underwater mortgages) and mortgages with small lenders that may not routinely report to the major credit bureaus (up to 70% more prevalent among lower score borrowers).

Based on the information provided by CoreLogic, it appears that the CoreScore model will have a disparate impact on lower score/lower income individuals and families. The CoreScore will especially impact those that have gone through economic hardship resulting in foreclosure, short sale, or even delinquent mortgage or rent payments.

An area of concern for many consumer attorneys is improper reporting of foreclosure actions, which are generally public record, and often include named defendants that are not the borrowers on the defaulted loan. For example, imagine you took out a mortgage in 2005 in your name only but placed yourself and your spouse on the title. You subsequently default on the mortgage and a foreclosure action is filed. When the bank files its lawsuit it will often name not only the borrower, but also any party that may have an interest in the property (i.e., your spouse on the title), as a defendant. Fast forward a few years later… You and your spouse are back on your feet and would like to purchase a home again (presumably one that is worth what you will owe on it). Because you recently went through foreclosure, your credit is too weak to obtain a mortgage. Your spouse gets a copy of her credit reports from the top 3 credit bureaus and it shows that her score is in the 700s (usually high enough to qualify for a proper mortgage). However, when the lender pulls the CoreScore report, she may be rejected based on the public record showing that she has been sued in a foreclosure action. In the aftermath of the housing crisis, this type of scenario may become increasingly common.

CoreLogic claims that the CoreScore complies with the Fair Credit Reporting Act (FCRA). The FCRA requires most negative information be removed after 7 years. According to § 605 of the FCRA, the report may not include any information relating to civil suits, civil judgments, accounts sent to collection, foreclosures, etc. that are more than 7 years old. The FCRA also requires Credit Reporting Agencies provide you a free copy of your consumer report as well as provide procedures for you to dispute incorrect information. CoreLogic is offering this information both directly and via the FCRA central source[1].

If you uncover an item that is being improperly included on the report, you may dispute the item by notifying CoreLogic by phone or mail. Under the requirements of § 622 of the FCRA, CoreLogic must investigate disputes and update your file within 30-45 days if they determine that the item is being reported incorrectly.

If you have questions about foreclosure, loan modification, bankruptcy, or other alternatives, please feel free to call my office at 954-484-9987, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.