What Every Millenial Needs to Know About Buying a Home
By: Tiger Mynarcik
Founder of Tradewind Investments
RUMOR MILL: There are several things changing in the world of finance and much of it allows for a path to homeownership if you are willing to do some work. Below are some of the interesting points about becoming a homeowner today.
Consumers without credit scores are essentially ineligible to apply for lending products such as credit cards, mortgages, and auto loans. But recent advances in alternative data and credit scoring methods have made it possible to generate credit scores for millions of otherwise “unscoreable” consumers.Credit scores can give millions of additional consumers access to mainstream lending products, allowing them to forego payday lending or other products that expose them to excessive fees and interest rates, and other undesirable terms.
At a recent panel discussion hosted by the Housing Finance Policy Center, three experts discussed the benefits and challenges of alternative credit scoring.
In honor of Financial Capability Month, we share some surprising facts that emerged about alternative credit scores:
Alternative scoring could generate scores for 40 million previously unscored consumers. According to Sarah Davies, senior vice president of analytics and research at VantageScore Solutions, up to 47 million US consumers have “thin credit files.” This means their credit profiles don’t have enough recent activity or history of loan repayment to meet the requirements of traditional scoring models. However by employing alternative segmentation and scoring techniques, as many as 40 million of these 47 million previously unscoreable consumers can now be scored. You can read more from the Urban Institute here.
Millennia’s are being considered for new scoring systems due to how they spend money differently than their predecessors. Millennials don’t borrow and lend in the same way as their predecessors; it's a fact. Indeed, Millennials prefer to shell out the dough for organic products rather than repay mortgage debt. So while spending habits have changed, the credit score system hasn’t, leaving a lot of Millennials without access to credit.
The antiquated FICO system will be evolving to provide a truer picture of ones ability to handle finances. Whether you will be renting a home, buying a home or new auto, the system will have new points systems. It will be important to stay up with the changes so you are represented in the fairest position. Tradewind Investmentsassists many tenants into becoming homeowners. By staying informed as the market's conditions evolves is one of the secrets to our success.
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