New scoring model may help lenders better assess a consumer's credit risk.

The subprime mortgage crisis forced lenders to tighten their credit standards, putting a new set of rules, regulations and requirements in motion that have made it more difficult for prospective homeowners to secure financing. Although the Homebuyer Tax Credit, record low mortgage rates and special incentives have made homeownership more advantageous for home buyers, the strict credit requirements have not.

Efforts to help lenders determine the creditworthiness of potential borrowers have led the credit analysis company FICO to develop a new model for mortgage creditors. The FICO 8 Mortgage Score will be made available to the three credit reporting bureaus, allowing lenders to better assess the risk of a potential borrower.

The model works by analyzing an applicant's full credit history, providing a sharper analysis to lenders and mitigating the risk of future mortgage loan debt and foreclosure. The scoring range is the same used for traditional consumer credit scores - between 300 and 850 - but the model takes a number of variable factors into consideration when making its determination.

"To do the best job of evaluating risk and increasing profits, lenders need updated credit scoring analytics that incorporate mortgage credit performance since the subprime mortgage meltdown," TowerGroup senior research director Craig Focardi said. "The availability of mortgage credit scores across all three credit reporting agencies will enable lenders to upgrade their loan underwriting and account management practices."

Consumers considering purchasing a home in the near future should find out their credit score and contact their lender to determine their credit requirements. Individuals may also be required to provide two copies of their credit report to lenders, so financial professionals encourage consumers to review their reports for accuracy before submitting an application.