New legislation currently in the Senate may help Americans' ability to buy a home by using alternative credit scoring models. The bill would allow the nation's largest mortgage lenders to consider a borrower's creditworthiness by examining credit scores other than the traditional FICO.
Co-sponsored by Sens. Tim Scott (R-SC) and Mark Warner (D-VA) was drafted to eliminate the narrow parameters of current scoring methods. A person's FICO score evaluates whether debts like mortgages, credit cards and student loans are paid, whereas alternative credit scores take into consideration things like cellphone bills, utility payments and rent.
An assessment by VantageScore, an alternative credit bureau estimates that over 72,000 creditworthy households would be additionally served annually by more inclusive scoring models. This includes expanding mortgage access.
Meanwhile, conforming no-point 30-year fixed mortgage rates averaging 4 percent while 15-year rates are near 3.25 percent.
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