One-Third of Consumers Would Switch Lenders Over Legacy Credit Scores
Experian research indicates that 33 percent of consumers would switch mortgage lenders if they rely on outdated credit scoring models. Gen Z is leading demand for change.
A significant portion of consumers expect mortgage lenders to adopt modern credit scoring approaches that consider a broader range of financial behaviors, according to new research from Experian. The study found that 33 percent of consumers would actively seek a new mortgage lender if they discovered their current one relied on legacy credit scoring models that exclude rent and utility payments.
The findings suggest a growing shift in consumer expectations around mortgage underwriting, particularly as awareness of expanded data and newer credit scoring models increases. Furthermore, the research highlighted that incorporating everyday payment habits into credit evaluations could encourage more individuals to consider homeownership. Over half of consumers, 52 percent, stated they would be more interested in pursuing homeownership if lenders considered additional positive payment history, such as rent and utility payments.
Demand for modernized credit scoring appears to be led by younger demographics. The study revealed that 76 percent of Gen Z adults said the type of credit scoring model used by a mortgage lender would influence their decision to stay with or move to another lender. Nearly half of Gen Z adults surveyed (48 percent) expect to be in a position to purchase a home within the next four years.
Experian stated that consumer demand for broader credit assessment aligns with the Federal Housing Finance Agency's (FHFA) ongoing transition to modern scoring models for mortgage decisions. Models like VantageScore 4.0 can incorporate alternative data, potentially benefiting consumers with limited traditional credit histories. Experian is offering incentives, including reduced pricing for its VantageScore 4.0 for mortgage originations, to support the industry's shift.