New Credit Score Model Expands Access for Homebuyers with Limited Credit History

A new credit scoring model accepted for all mortgages sold to Fannie Mae and Freddie Mac may increase the pool of potential homebuyers who are eligible for AHFA programs. Vantage Score 4.0 is designed to help first-time buyers, renters, and those with low to moderate income — particularly younger buyers or underserved populations with shorter credit histories.

Key changes include:

• Only one month of credit history is needed to get a score, compared to six months for classic FICO scoring.

• Paid collections, including nonmedical, do not impact the score.

• Unpaid medical debt does not impact the score.

• Regular rent and utility payments can improve the score.

“These changes could open the door to homeownership for thousands of Alabamians who have been locked out by traditional credit scoring,” said AHFA Single-Family Administrator Carrie Hamaker. “Better credit access leads to greater opportunities for the customers that AHFA programs are designed to help — and for our Realtors and participating lenders who serve them.”

“ ... 21% of millennials have 'thin files,’ making it difficult for lenders to see them as strong borrowers and leading to more young consumers not able to get the credit they need.”

Source: VantageScore.com

For more information, visit Credit Scores | FHFA or email [email protected].