The National Association of Realtors (NAR) says that the adoption of new credit-scoring models could improve the ability of borrowers who lost their homes during the foreclosure crisis to buy again. Nearly 1 million of the 9.3 million homeowners who underwent a foreclosure, received a deed-in-lieu of foreclosure or sold their homes in a short sale between 2006 and 2014 have already purchased a home again, according to a new study by the NAR.
Demand from so-called “boomerang” buyers will continue to bolster the housing market in the years ahead, with an additional 1.5 million consumers from the group analyzed by the NAR expected to become eligible for a home loan and purchase a home over the next five years, the NAR said. But damaged credit profiles and strict lending standards will continue to keep millions of would-be buyers on the sidelines. If lenders warm up to new credit-scoring models, however, many borrowers locked out of the housing market could re-enter it, according to the NAR.
NAR Chief Economist Lawrence Yun pointed towards the Vantage Score 3.0 and FICO 9 as credit-scoring models that could improve some borrowers’ access to credit. Both models generally produce higher credit scores for borrowers with unpaid medical bills, and assign credit scores to some consumers who previously couldn’t get them. Vantage Score 3.0 also factors in a person’s rental payment history if such data is available. A FICO credit-scoring model currently being piloted by credit card issuers would hand even more credit scores to borrowers who previously couldn’t get them due to lack of recent credit history.