CREDIT EVALUATION FOR HOMEBUYERS - An Old Standby Technique Making A Comeback!
ALTERNATIVE CREDIT SCORING COULD HELP THOSE WITH LITTLE ESTABLISHED CREDIT, OR THOSE WITH BORDERLINE FICO SCORES!
For several years now, lenders considering the qualifications of potential homebuyers simply reviewed their Fair-Isaac Credit Scores. These proprietary formulas factored in primarily payment histories and debt levels. Reviewing other items potentially predictive of payment behavior, such as timeliness of rent payments or writing of valid checks, were only reviewed for those without established credit, as a way of creating possible mortgage opportunities to a wider range of purchasers.
With today's crunch in credit a reality, and loan defaults increasing several fold, some lenders are beginning to broaden this more detailed credit screening program for a larger group of potential borrowers.
Large Credit Bureaus TransUnion and Experian just announced an alternative credit score containing more detailed payment behavior. Fair Isaac, the company that developed the widely-used FICO Credit Scoring System, has expanded its scoring formula to take monthly rent and utility payment behavior into account.
Those contemplating buying a home should consider ALL possible payment behaviors when applying for a mortgage loan, and be responsible when paying all bills and drafting checks. On the flip side, those without established credit histories will now find expanded opportunities to finance their home, provided they are handling what little debts they do have responsibly.
See Jane J. Kim's article in the March 30th edition of The Chicago Tribune, sourced in The Wall Street Journal, for more information.
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