The unveiling of a new FICO credit scoring formula that could make it easier for some consumers to buy a home was heartily greeted by the real estate industry, but potential homebuyers shouldn't count on it just yet.

FICO Score 9 is intended to be a more nuanced look at a person's credit wherewithal, according to the firm, because it separates medical debt collection issues from other unresolved debts, weighing the two categories differently. As a result, the firm anticipates that a consumer with the median credit score of 711 whose only negative collection issue is medical-related will see their score increase by 25 points.

Other changes to the model will better gauge the ability of a consumer who has a limited credit history, known in the business as a thin file, to repay a prospective debt. Earlier this month, the new FICO score was made available to lenders by Equifax, which along with TransUnion and Experian makes up the big three credit bureaus used by lenders.

Steve Brown, president of the National Association of Realtors, said the changed formula will "ultimately make a real difference in the lives of millions of Americans who have been shut out of the housing market or forced to pay higher mortgage interest rates because of flawed credit scores."

Maybe, but not for a while.

The overwhelming majority of mortgages are backed by Fannie Mae, Freddie Mac or the U.S. Department of Housing and Urban Development. A few phone calls to some of the larger local mortgage lenders quickly made it clear that lenders won't really start talking about FICO Score 9 until those agencies that support their loans do, and Fannie and Freddie rely on much older versions of the credit scoring formula.

FICO scores range from 300 to 850, and the score is among the factors used to determine the interest rate on a loan. While any increase in a credit score is good, a 25-point bump in a FICO score may not do much to lower an interest rate, analysts have noted.

"We work closely with (Fannie Mae and Freddie Mac) to align with the scores they currently accept and when they will use the new one," Wells Fargo spokesman James Hines said in an email.

Ryan Mecum, assistant vice president at Wintrust Mortgage, said he thinks the change will make it easier for homebuyers, especially those with limited credit histories, to buy a home but "it's not like it's going to happen on an individual lender basis. It's going to happen as the agencies adopt it."

Other lenders aren't even ready to publicly talk about the new formula and its potential effect on homebuying. However, in a survey of mortgage originators by the Realtors' group, 60 percent said the new scoring model would increase the number of accepted loan applications. The other 40 percent of respondents said there would be no change, either because they used an earlier version of the scoring model or would defer to the credit scoring models used by their investors or those used by Fannie Mae and Freddie Mac.

The changes come at a time when real estate agents and homebuilders continue to complain that tight mortgage lending standards are restricting the housing market's recovery.

The National Association of Home Builders recently reported that more than half of the single-family homebuilders it surveyed described lending conditions as tight or very tight, and economists at the trade group estimated that the lending environment had led to a loss of 18,700 new-home sales during the last six months because prospective buyers couldn't qualify for a mortgage.

Best neighborhoods for candy. The Second City took third place in Zillow's annual look at the 20 best cities to trick-or-treat in the nation, as Chicago was bested by San Francisco and Los Angeles. Chicago's third-place ranking compared with seventh place in 2013. To calculate rankings, Zillow equally weighed its home value index for cities, population density, Walk Score and local crime data.

Using those criteria, the top five city neighborhoods were Roscoe Village, Edison Park, Bucktown, Sheffield Neighbors and Belmont Heights.

mepodmolik@tribune.com

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