HUD to Consider Credit Scoring Alternatives?

The U.S. Department of Housing and Urban Development is looking at the way companies calculate credit scores as part of its effort to improve credit access to Americans, HUD Secretary Julian Castro recently told several real estate trade groups.

“We do hear about the need to look at new ways of incorporating and analyzing data so that it’s more sensitive to getting at the responsibility folks have shown in their lives that would indicate—be predictive of—their future behavior and paying down that mortgage,” Castro said during a Credit Access Symposium on April 1, as reported by the National Association of Realtors (NAR).

“There’s been a disconnect there,” Castro added. 

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Among the recommendations to come out of the meeting is a need to add measurement standards that better reflect “changing technology, lifestyles, and demographic trends in the U.S., because up-and-coming minority and millennial consumers don’t use credit in the same way households did in the past,” NAR said.

“For that reason, experts suggested credit scoring companies build in those non-traditional payments like monthly rent and utility bills into their models,” NAR said.

FICO and Vantage Score representatives at the meeting said they are incorporating some of those non-traditional payments into their models and plan to build upon those innovations, NAR reported. 

“It’s such a critical topic,” said NAR President Chris Polychron. “We’d like to see these scoring models that rely on non-traditional histories. We just have a lot to do.”

The event took place at NAR headquarters in Washington. The Asian Real Estate Association of America and the National Association of Hispanic Real Estate Professionals partnered with NAR on the meeting, which also included other participants. 

View a clip of Castro speaking here.

Written by Cassandra Dowell

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  • I read the article three times to make sure I did not see the word “Reverse Mortgage” and as far as my eyes could tell, no mention of it:)

    My only concern is when they used the term, “Americans”. One can’t be to relaxed when words like that are used?

    John A. Smaldone

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