Using nontraditional credit to leverage lenders

Due to the stress of the economic downturn that has plagued the country since 2008, many Americans have watched their credit scores go down the drain, making it nearly impossible for them to secure credit decisions for big-ticket purchases such as a mortgage on a home.

 In an effort to help rebuild this faltering credit scores, some experts argue that national credit bureaus should start examining consumers' monthly nontraditional credit payments, such as rent, utility, cellphone and insurance bills. For example, while some consumers pay amount in rent equitable to what others pay for their monthly mortgage bills, it goes virtually unrecognized. However, according to the Los Angeles Times, mortgage applicants are by law able to bring their nontraditional credit payments forward to lenders, who are by law required to take these payments into account when determining whether or not to grant a consumer a home loan. "Although federal financial regulators generally acknowledge the right to present supplementary data that consumers enjoy under the Equal Credit Opportunity Act, only one - the National Credit Union Administration - has published guidance informing lenders that they are required to comply," Kenneth Harney wrote for the source. If this option is available, then why aren't more consumers stepping up and reporting their nontraditional credit? For starters, most loan officers don't pay any attention to the Federal Reserve's Regulation B, which interprets the rules on alternative credit. Furthermore, they don't want the hassle of sorting though "unofficial" records, which could potentially be inaccurate. Some major names such as Fannie Mae, Freddie Mac and the Federal Housing Administration have strict regulations on what they will actually accept in terms of nontraditional credit data. "The [national] bureaus know that alternative data is highly predictive," Barrett Burns, chief executive of VantageScore, told the source. "We think millions of people could benefit if it were collected and loaded into scoreable files." However, Burns noted that in some states access to utility payments is hard to come by and collecting cellphone account records may breach privacy issues. If consumers are looking for other ways to rebuild their credit, they can build a budget, set financial goals and work on increasing their credit by living a lifestyle that is within their means, the Red, White and Blue Press noted.