For the better part of this decade, there’s been a movement afoot to try to get the two main sources of mortgage financing, Fannie Mae and Freddie Mac, to begin using newer credit scoring models that use factors like a person’s bank account history or utility payments as a consideration when determining their creditworthiness.
Fannie and Freddie’s overseer, the Federal Housing Finance Agency, put an end to that movement when it announced last year that it will not be utilizing any new credit scoring model any time soon.
But that doesn’t mean that there aren’t options for borrowers with less-than-traditional credit histories.
In fact, there’s now one mortgage company that will lend to borrowers who have no credit score at all.
Waterstone Mortgage, a national lender based in Wisconsin and licensed to lend in 48 states, announced Tuesday that it is now lending to borrowers who do not have a credit history.
According to the company, its “Non-Traditional Credit Program” will use other payment history indicators like cell phone bills, rent, utilities, and insurance premiums when underwriting a borrower.
Using Consumer Financial Protection Bureau data, Waterstone Mortgage claims that there are 45 million adult Americans that either have no credit score or a limited or outdated credit history that cannot be scored by Equifax, Experian, and Transunion.
That means that approximately 18% of the adult American population is “credit invisible,” meaning they either have a limited credit history or a non-existent one.
“While a credit score is certainly very useful for determining a homebuyer’s ability to pay their mortgage payment, other payment indicators – such as bills that are consistently paid in full and on time – can be extremely telling,” said Kim Newby, Waterstone Mortgage senior vice president of investor relations and product development.
“Of course, the Non-Traditional Credit Program is ideal for borrowers who only use cash, debit, or personal checks on a regular basis. But it’s also designed for those who have had credit cards or loans in the past, but who haven’t utilized credit in more than two years,” Newby added. “Also, recent immigrants who haven’t yet established a credit score in the United States could benefit from this program, as well as young adults and recent college graduates who are just beginning to build their credit.”
According to the company, borrowers without credit scores can qualify for “conventional, FHA, USDA, or VA loan options.”