This newer mortgage lender employs
alternative credit scoring methods to provide home financing for young borrowers who may be overlooked by lenders who use traditional underwriting standards.
The fact is that they may also be able to benefit by relying
upon alternative credit scores to make their decisions when it comes to applications they receive.
Watt, a former congressman from North Carolina and long - time member of the House Financial Services Committee, threw cold water on the idea that Fannie and Freddie would begin
using alternative credit scoring models at any point in the next two years.
Meanwhile, according to S&P, «the enterprises must continue to pursue initiatives to expand what loan originators consider an eligible borrower, including
evaluating alternative credit scoring models, assessing impediments to credit access, and clarifying operational standards with other market participants.»
CredoLab, a fintech provider of highly predictive, mobile -
based alternative credit scoring solutions for banks, consumer finance companies, and retailers, announced it
This is where new techniques, such
as alternative credit scoring and peer - to - peer lending, may help democratize access to credit in underbanked populations.
But the provision in the Senate bill has elicited strong pushback from some lawmakers as well as FICO, arguing that the FHFA is already going through its own process of
reviewing alternative credit scoring models and the bill could actually delay that process.
A diverse group of housing industry stakeholders participated in a credit access symposium recently to discuss
how alternative credit scoring models could expand access to mortgage credit for responsible borrowers who may have thin credit histories or extenuating circumstances like medical debts.
«If lenders and the government - sponsored enterprises were to
adopt alternative credit scoring methods, such as FICO 9 and VantageScore 3.0, they could expand access to mortgage credit without dramatically increasing risk in the housing market,» says Polychron.
Watt told an industry group last month that the FHFA is supposed to issue a request for information this fall addressing the impact
of alternative credit scoring models on access to credit, costs and operational considerations.
One reason more lenders are
using alternative credit scoring is because the Fair Isaac Corp., creator of the widely used FICO credit score, recently introduced the FICO Score XD, a credit - scoring method that's based on alternative data sources such as cellphone and cable payments.
«It contains some favorable provisions for the housing industry, including expanding Fannie Mae and Freddie Mac's use of
alternative credit scoring models and easing credit through reduced regulatory burdens on smaller community banks and credit unions.»
A recent CFSI review of early test data on three of the projects listed above — FICO Expansion Score, RiskView, and Link2Credit — concluded that
alternative credit scores can be generated for most individuals who lack traditional credit scores and that alternative scores have meaningful, predictive value for lenders who extend credit to individuals with little or no traditional credit histories.13 /
Therefore, you can tell your creditors to use
this alternative credit scores to assess your credit.
Opt for
alternative credit scores.
PRBC worked with FICO, the company who created the FICO score, to come up with
an alternative credit score that pulls information from a PRBC credit report.
«There's an unfairness to this, which can be reduced with the use of
alternative credit scoring, and today's Big Data solutions make the data needed to create this scoring readily available.»
They factor rent payments on your apartment into an «
alternative credit score.»
Care to explain what an «
alternative credit score» is, who uses it, or why it does you any good?
But supporters of the proposal also argue that FICO enjoys a monopoly and
alternative credit scoring models could expand access to mortgage credit.
There's a precedent for this, Ely noted: VantageScore,
the alternative credit score the three bureaus created to compete with FICO.
«The major proponents of
the alternative credit scoring model are large nonbank originators and credit reporting firms — companies that make their living from the quantity of loans they originate, not the quality.
Care to explain what an «
alternative credit score» is, who uses it, or why it does you any good?
They factor rent payments on your apartment into an «
alternative credit score.»
«They may just correlate FICO with
the alternative credit score,» Kapfidze said.
If lenders were to begin using
these alternative credit scores, more people might be able to qualify for a mortgage — but that's not a given.