Can You Use An Alternative Credit Report to Apply for a Home Loan?

During the loan approval process, mortgage lenders typically pull traditional credit reports from one of the big three credit bureaus: Equifax, Experian or TransUnion. They don't usually look at alternative credit reports. 

The key word there is "usually." Legally speaking, lenders have to accept alternative credit information if you provide it to them. So if you bring an alternative credit report to a meeting with your loan officer, they'll have to review it while assessing your ability to handle a mortgage. 

Realtors Already Support Alternative Credit Scores 

The Consumer Financial Protection Bureau recently found that the three major credit bureaus cannot develop credit reports on 45 million people. Why? Because those people don't have extensive credit records. 

"The National Association of Realtors (NAR) announced their support for alternative credit-scoring models."

Bankers aren't oblivious to the fact that many people don't have traditional credit reports. Plenty of people come into their offices looking for home loans, but the loan officers don't want to take the risk of lending to someone who may not be able to keep up with payments. The problem is that they have no way of knowing whether a person is financially responsible.

That's why many professionals in the housing industry are advocating for alternative credit data. For example, the National Association of Realtors (NAR) announced their support for alternative credit-scoring models in a letter two members of Congress. The letter expressed support for a bill titled "Credit Score Competition Act of 2015."

Submitted by Rep. Ed Royce, R-CA., and Rep. Terri Sewell, D-AL., the bill would allow Fannie Mae and Freddie Mac to use credit-scoring models other than the FICO credit score. In fact, Sewell reintroduced the bill earlier this year, according to HousingWire. 

The NAR maintained that "minorities, immigrants, and people with modest incomes" typically avoid going into debt due to their tough financial situations. That's why they don't have extensive credit histories. Alternative credit reports, on the other hand, would enable them to obtain loans, provided they keep up with their rent and utilities. 

What to Say When You Speak With a Lender 

When you approach a home lender, direct them to where you got your alternative credit report. If you use PRBC, you can direct your loan officer to Here, they'll be able to sign up to receive your alternative credit report. If you have any other questions about alternative credit reports, check out our FAQ

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