Wider Home Market Base Seen on New FICO Score


SARASOTA, FLORIDA, August 22nd, 2015 – Recent initiatives on an alternative credit-scoring system can help significantly improve the homeownership rate which remains relatively low in the city of Sarasota. Census figures show that homeownership rate in the city was at 55.4% out of 22,621 Sarasota households during 2009-2013period. This compares with the 67.1% estimate of homeownership for all of Florida in the same time span and the 63.4% national Census data for the 2015 second quarter.

The new credit-scoring system is now being pilot-tested by Fair Isaac Corporation with a dozen credit card companies. It is intended to be an alternative to the company’s FICO score now widely used by lenders. Typically, a FICO score’s range is from 300 to 850; the higher the rating, the better.

Expanded data base

Wider Home Market Base Seen on New FICO Score

The new systems is expected to benefit some 26 million Americans or about 11% of the U.S. population who are “credit invisible,” meaning they don’t have a credit file and thus have difficulty in obtaining traditional loans. The new scoring system uses data about utility and telecom bills provided by Equifax, in addition to utilizing property records from LexisNexis to come up with a three-digit score for people who couldn’t be rated under the traditional FICO model. After the pilot test with the credit card issuers, Fair Isaac hopes to expand its new scoring system later this year to other lenders, possibly including mortgage companies.

The new scoring system is expected to open access of more people to many forms of credit. Fair Isaac said that some 15 million individuals tracked under the new rating system scored above 620. Like in the older system, the new system’s score ranges from 300 to 850. Notably, some of mortgage lenders approve borrowers with FICO scores of above 620 under the old system.

Boon for Latinos

In terms of demographics, the most profound impact of the new credit rating system would likely be felt among Latinos or Hispanics. The spending or consumption pattern of these ethnic group is mostly not covered in the traditional scoring system used by banks and credit-reporting bodies to determine whether a borrower qualifies for a car loan or mortgage. These folks typically pay in cash, and with their extended families sharing a residence, a Latino household tend to pool resources of individual members.

More of the Latinos getting “credit visible” under the new FICO system should provide an added market tailwind, particularly on housing. This ethnic group now comprises over 17% of the U.S. population, which is expected to double in the years ahead. In Sarasota, Census figures put Hispanics or Latinos at 16.6% of the population, constituting the second largest ethnic group in the city’s estimated 53,326 residents in 2013.

It is likewise significant to note that the Latinos have already been successfully assimilated into the Southwest Florida community. Importantly, it has a fast-growing middle class too. Around the mid-2000s, for instance,the Latin Gulf Coast Chamber of Commerce only had 50 members. Now, the chamber has over 200 members, some of which are representatives of property companies actively contributing to the growth of local businesses and also likely to benefit from the new credit standards now underway.