What An Increase In Credit Report Fees Means For Homeowners In 2023
Buying a home has become even more expensive thanks to a fee increase instituted by the Fair Isaac Corporation (FICO), which is the company that generates credit reports. Many mortgage lenders depend on these reports when processing a customer's loan application. According to a November letter from the National Consumer Reporting Association, their members can expect a 10% to 400% increase in fees from FICO itself and from all three credit bureaus. This increase, as outlined in the document, is to take effect in 2023.
The letter goes on to describe the changes in pricing, which involves 46 lenders receiving only a 10% increase. Meanwhile, only six lenders will receive a 200% uptake in fees, and all other mortgage companies will have to contend with the 400% increase. This change in pricing for credit reports will pack quite a punch for a housing industry that's already dealing with high interest rates and an ever-growing number of customers who are choosing to wait out the storm before trying to buy a home.
The effect on the buyer
Although FICO's price increase presents a new challenge to companies who are trying to sell residential properties, individuals who are looking to purchase a house while adhering to a budget may feel the sting of rising prices the most. As mentioned in the Miami Herald, part of processing loan applications includes getting applicants' credit scores and detailed reports of their credit history. Because the three credit bureaus and FICO charge the lenders a fee to obtain this information, the cost is then passed on to the buyer as part of their closing costs once they establish a real estate contract and are granted the mortgage.
In other words, the fee for obtaining a credit report adds one more thing for buyers to have to plan for when they are reviewing their savings accounts and budget allotments for a new home. As such, those who are approved for a loan will probably see a bump in their closing costs.