Currently, most bank lenders prefer to retain FICO scoring for credit decisions as the FICO system – introduced by Bill Fair and Earl Isaac in 1956 – is well-established and incorporates stricter guidelines. This enables the banks to avoid offering mortgages to customers with riskier credit profiles, keeping their default ratios low.
An increasing number of non-bank mortgage lenders, including Caliber, disagree with the big banks’ loyalty to FICO scoring. When lenders were approached by the FHFA last month and invited to share their opinions of credit scoring methods, Caliber CEO Sanjiv Das pointed out that FICO scoring tended to punish millennials because of their younger ages.
“I strongly believe that a large number of customers are being excluded because of the slavish reliance on FICO,” Mr. Das said.
He added that more younger homebuyers could qualify for a loan if alternate credit scoring systems were used by more lenders. As a leader in the mortgage industry, Caliber believes it’s important to explore the necessary options that will make home ownership available to more families throughout the nation.
Read the entire Wall Street Journal article.