Non-Traditional Credit Scoring: Wot’s All This, Then?

2000 was the year to sell your house.  Thanks to an insanely inflated housing market, and an algal-bloom of sub-prime lenders – one would almost have had to fill out one’s mortgage application in crayon to not qualify for a home loan.

Almost.

Credit scoring – that number between, say, 300 and 850, that says, “pick me! pick me!” – still put a hitch in the giddy-up for many looking for home loans, especially consumers with terminally bad or, alternately, no credit scores to speak of.

Until recently, credit scores were the best way to get the attention of lenders in the housing market.  It mattered little how long you’d lived in the same house or apartment, how long you’d held your job, or how regularly you paid your phone and cable bills on time.  Your credit score – that 300 to 850 number – was the primary number used either for or against you, and the only factors contributing to it were performance on revolving loans like credit cards and high-ticket non-revolving loans like car loans and previous mortgages.

This effectively put individuals without credit cards, or without extensive credit history (i.e., young students, minorities), at a disadvantage in the heady world of real estate.  This also effectively put thousands of individuals out of the reach of lenders who might be able to turn a profit out of these mathematically risky individuals.

Enter the realm of non-traditional credit scores.  These are scores that eschew solely using traditional numbers and instead combine information like rental history, job history, and bill history in the hopes of painting a better portrait of these consumers as potential borrowers, and more to the point, re-payers.

This is great news, of course, for folks not usually served by the mortgage industry because they can’t get a foothold with their sub-prime credit scores.  Non-traditional credit scoring provides these consumers the opportunity to develop a credit history without accumulating credit card debt.