For individuals without any credit, securing a mortgage loan can be nearly impossible. Most of us know that a mortgage approval is based on several different factors, however, the largest factor is your credit – or more specifically, your FICO credit score.
Currently, FICO scores pulled from Equifax, Experian, and TransUnion are the only reports to measure a potential borrower’s credit worthiness.
But there’s a problem with that – some would be borrowers have so little credit that they don’t even have a FICO score at all, and because of that, some borrowers are turned down for mortgages.
However, all of this may be changing soon, according to an announcement by HUD Secretary Julian Castro and NAR President Chris Polychron earlier this month. According to the two industry specialists, the agencies are exploring alternative credit systems in an effort to expand American’s access to mortgages.
This announcement falls in line with last year’s statement by VantageScore – an alternative scoring system – that Fannie Mae and Freddie Mac, the two government loan agencies, were looking into updating their credit scoring methods.
Though it has not yet been confirmed that VantageScore will be used along with or in place of FICO scoring, this new development – if utilized – could work to change the game for many borrowers – 7.6 million borrowers to be specific.