If you thought it was tough to get approved for a home loan in 2010, you haven’t seen anything yet! 2011 looks to bring more rigorous credit scoring criteria. Our friends at Fair Isaac, better known as FICO, recently introduced a new way of scoring called the FICO 8 Mortgage Score. Another scoring company growing in popularity, VantageScore is also undergoing significant restructuring for January 2011.

Why, you ask, have they done this??? Well, for starters, it’s to better monitor consumer behavior during this time of real estate turmoil and national recession. The two scoring systems are looking to better predict who will likely fall to what “experts” call a “strategic default” on a mortgage. A strategic default is when a borrower is able to pay for their home, nevertheless, decides to stop paying on their mortgage, yet, they still maintain their other various debt obligations, such as a car loan, credit cards, student loans, etc.

Homeowners will “jump ship” on a property that is underwater – meaning they owe more than what the property is currently worth – mainly because they feel it’s not worth it to continue to make payments on an asset that has greatly depreciated. Strategic defaults rose 53% from 2009’s cases. For the most part, what Equifax, Experian, and TransUnion are seeing is that these defaults are virtually coming from out of nowhere and from borrowers with otherwise pristine credit.

While all the fine details still remain a closely guarded secret, we can tell you that VantageScore will examine pre and post-recession credit by overlapping trends from 2006 – 2009. Also, VantageScore plans to place more emphasis on some parts of your credit and less on other areas. For example: shopping around for new lines of credit can far hurt you more than it has in the past. In 2011 open lines of credit or potential credit will account for 30% of your score instead of the 10% it once comprised in early versions of scoring. Alternately, the balances and length of your credit history now take up a mere 8-9% instead of the 13-15% it once accounted for.

Meanwhile, FICO is certain its new scoring criteria will help prevent at least 115,000 foreclosures, saving more than $1 Billion. “The FICO 8 Mortgage Score’s broad availability means that all US lenders and servicers can now easily access scores that are fine-tuned for mortgage performance” said Jordan Graham, executive vice president of Scores and president of Consumer Services at FICO.

If you are in the market for a home loan, or any loan, for that matter, might I suggest making cleaning up your credit score a New Year’s resolution for 2011? In the long run, a top FICO Score or VantageScore can only help you and move you and your family in an “onward and upward” motion for the future.

Contact Lefton and Associates for help with scoring criteria or cleaning up your credit.