Scoring Study Spotlights Utility, Phone Data

Mortgage lenders could use utility and telecommunication payment histories in their mainstream credit scoring models to qualify more minority and low-income homebuyers without affecting applicants who usually score well, according to a new study by the Brookings Institution.The study discovered that incorporating nontraditional data can open the door for borrowers with "thin files" to gain access to credit at favorable rates. Acceptance rates jumped 22% for Hispanics and 21% for blacks during testing of 8 million credit files run through the VantageScore credit scoring system. Currently, many mortgage lenders use alternative systems to score minorities and borrowers with thin files. But no one knew how it would affect people with established credit, according Alyssa Lee, acting director of the Urban Markets Initiative at Brookings. If the utility and telecommunication data are incorporated into mainstream systems, mortgage lenders "can actually do their job more quickly," she said.