Magazine article American Banker

Lender Opts for Alt Scoring

Magazine article American Banker

Lender Opts for Alt Scoring

Article excerpt

Byline: John Adams

Many consumers have cut debt lately to shore up personal finances. Their lack of debt records can pose a challenge to mortgage lenders.

Now Churchill Mortgage has turned to a Web engine to analyze payments of "nondebt" expenses and create an alternative to traditional credit scores.

Churchill is the first lender to license a service from eCredible that gives information on rent, utilities and insurance bills as part of the process that matches consumers to loan products based on a grading system.

"This service allows these people [without credit scores] to get home funding," says Matt Clarke, chief financial and operating officer of Churchill Mortgage, a conventional Federal Housing Administration and Veterans Administration residential mortgage lender operating in 25 states.

Clarke says an analysis of recurring bills gives a better picture of creditworthiness than a snapshot of mostly debt instruments such as credit cards or previous mortgages. The alternative analysis also expands the prospect pool for Churchill, even though according to CardHub.com credit card debt fell to $764 billion in the first quarter from $810 billion the previous quarter.

The product works like online bill payment. Consumers enter various monthly transactions and update the site when bills are paid. Then, before a borrower applies for a mortgage, a Web-based product is used to deliver the potential lender with credit grade, from A downward. …

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