Guild Mortgage has launched a new program that substitutes rental payment history and residual income history for credit scores to serve first-time homebuyers better. According to a statement from Guild Mortgage, borrowers may be eligible to receive a lower interest rate and lesser fees if their Form Free report, which gives the rental payment history and residual income analysis, reveals consistent payment histories.

The Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), and the Department of Veterans Affairs are just a few of the home loan types that are eligible for the program (VA).

According to David Battany, executive vice president of capital markets at Guild Mortgage, Borrowers without a credit score typically pay higher fees and interest rates. Having to fill a mortgage lender’s credit score blind spot with extra data may result in a cheaper interest rate, which for some users may determine whether they qualify for a house loan.

The “Data Point: Credit Invisibles” report from the Consumer Financial Protection Bureau (CFPB) estimates that 19% of adults in the U.S. do not have a standard score. It is impossible to produce a current, accurate credit score for those consumers since 8% of people with no credit scores have “thin or stale” score files. Because they do not have a credit file with any of the three major credit agencies, Equifax, Experian, or TransUnion, another 11% of people are categorized as having “credit invisible” status. With such a revolutionary program, lenders are challenged to find more innovative ways of serving borrowers and ensuring that inclusion is widespread. To read more about this program, click here.

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