The tightened credit box routinely blamed for curtailing a full-blown housing recovery turned a corner in the second half of 2015, with Quicken Loans reporting originations to borrowers with credit scores as low as 580.
The Washington Post recently reported that Bill Banfield, VP of Quicken Loans, informed the paper that the lender offers FHA loans to qualified borrowers who have credit scores as low as 580—shattering the myth that private lenders are completely cutting off the credit hose to higher-risk borrowers.
If Banfield’s comments alone are not enough to ease concerns of a credit freeze, credit data and reporting agency Experian has a few statistics that could put the kibosh on claims of a credit freeze among the sub-650 credit score crowd.
In Experian’s Sixth Annual State of Credit Study, the firm notes that mortgage originations grew 42.5 percent in the 2015 survey when compared to data collected in 2014.
Furthermore, the national VantageScore credit score rose three points from 666 to 669, suggesting borrowers have restored their own balance sheets.
“If I were to give a grade to the overall picture of credit in the United States, I would give it an A-minus. I’m optimistic about the state of credit as we are seeing more loans being extended, late payments are decreasing and consumers are continuing to gain more confidence in originating loans,” said Michele Raneri, VP of analytics and new business development, Experian. “There definitely is growth and momentum—we’re back to prerecession levels in nearly every category, which means lenders are in a prime position to capitalize on this market and foster business growth.”
Apparently, Experian is not alone in its assessment. With borrowers more confident across the board, Banfield with Quicken highlighted the market’s next significant development—the willingness of private lenders to take a chance with well-qualified borrowers who may have had their credit histories destroyed during the downtown, but who otherwise remain competent borrowers.