NAR: Credit scoring model penalizing good borrowers

The National Association of Realtors wants Fair Isaac - the company which created the FICO credit score - to account for lender changes to borrowers' credit limits, saying that the current model is hurting home sales.

NAR officials told the Washington Post that many borrowers have been hurt because their banks have decided to reduce their credit limits, which makes it seem like the consumer is using much more of their available credit - one of the key credit scoring criteria. Higher use of credit generally drives down scores.

In some instances, credit lines are cut because of poor payment histories, but in others, lenders simply choose to drop the limit. Real estate agents say that the credit scores should account for the difference.

"There's absolutely no question these credit card and home equity line reductions are killing [home buying] deals and arbitrarily raising interest rates on people," Tom Salomone, a Florida real estate broker, told the paper, saying that he's seen some borrowers' scores drop up to 30 points.

It's unknown how much the change would affect the Houston real estate market, but credit scores in the city have fallen of late. A report last month by CreditKarma.com, the average credit score in the city fell from 667 to 662 during the third quarter.