Alternative Credit Reporting Can Allow for Easier Florida Mortgage Loan Approval
As you make up your mind to apply for a Florida home mortgage, one factor may get in the way: what does your credit score like? In order to receive approval, along with reasonable interest rates, individuals typically need a rating at least over 600.
A growing trend, however, is alternative credit reporting. Through new methods, you can bump up your score via recurring monthly payments, such as rent and insurance payments, that would actually be reported to credit bureaus. In the past, those types of payments generally have been ignored by creditors.
Many people are familiar with the three major credit bureaus - Equifax, Experian and Trans-union. However, there are a number of smaller credit bureaus in the country, said Norm Magnuson, spokesman for the Consumer Data Industry Association.
“They collect information on checking account activity, overdraft protection, payday loans and other things that are not reported to major credit bureaus,” he said.
Improve your credit, receive Florida mortgage loan approval
Monthly payments such as rent, child care and phone bills can also be added to some of these reports. Alternative credit reporting has been around for a while, but it has only recently started to grab the attention of major lenders.
With so many Americans saturated with credit card debt and credit offers, lenders are on the prowl for new customers, constantly exploring ways to prove potential customers’ credit worthiness. Moreover, people with little or no credit are looking for ways to show that they do pay their bills - in this way, having a bit of debt can actually be a positive thing in order to prove your payment responsibility and be approved for that Florida mortgage loan.
Anyone can get payment history information reported to one these credit bureaus, but the process is complicated. If you’re making these payments for rent or child care, for instance, on time each month, this information could help build your credit score. But there’s work and money involved.
How the system works
Credit card companies and financial institutions have the computer systems in place to automatically report payment histories. Landlords, utility companies and child-care centers typically do not.
To get this information into your credit file, you must verify that you made those payments. For a fee starting at $99, your data is uploaded it to online credit bureau PayRentBuildCredit (prbc.com). Once that’s done, customers may see a dramatic increase in their scores within six months.
The key to making this work: When you apply for credit, make sure to ask the lender to pull credit reports from all credit bureaus, not just the three major ones.
At least 75 percent of the U.S. population has accumulated enough credit history to generate a credit score from data reported to the three major credit bureaus, according to Fair Isaac. But the other 25 percent, or about 54 million people, has little or no credit history, and hence, no score. That causes a major problem when they consider a Florida home mortgage loan for the first time.
Fair Isaac did extensive research to find companies that collect nontraditional financial data in large quantities that could be used to help calculate a credit score. It has identified fewer than a dozen such repositories, Fair Isaac spokesman Craig Watts said.
They include groups that keep tabs on such things as how often a person uses overdraft protection and the number of checks they order each year. There are also groups that keep records on people who order books and music through book clubs, Watts said.
With that data, Fair Isaac is able to calculate a FICO expansion score, using the same analytical system it uses to calculate traditional FICO scores, which are widely used by major creditors.
But the program is in its early stages. If you wish to improve your rating, we still recommend the traditional way of doing so: consolidate debt, be patient and wait for pre-approval on that Florida home loan request.
