Hispanic population in the U.S. is the fastest growing sector in the country. However, despite of their increasing number, homeownership among Hispanics is not moving due to stricter lending policies that re based on outdated information and bases of creditworthiness. Due to their numbers that take up more than 17% of the population, which is also expected to double, Hispanics can be the saving grace of the falling homeownership rate and the solution the home market is looking for.
With the lowest homeownership rate of 63.8%, old gauging guidelines for creditworthiness keep the Hispanics from becoming homeownership. According to National Association of Hispanic Real Estate Professionals president, "communities of color under the current scoring model aren't being accurately captured. You don't have the opportunity to establish your credit."
Though Hispanics' families are usually extended which have a higher tendency of pooling resources and usually pay in cash, creditworthiness guidelines don't take these information into account whether a person is qualified for a mortgage or car loan. The current credit guidelines were made during the 1980s which limits the available loan products for the minority.
In a report issued by Consumer Financial Protection Bureau last May, 15% of 26 million Americans that are "credit- invisible" or have credit history in any credit- reporting companies belong to the Hispanic and African- American communities.
Credit reporting in the U.S. is dominated by FISCO. They are using the same technology since 2004 which is primarily basing on the borrower's income, payment history and debt load. When scoring a person's credit history, their main focus is whether the borrower is paying his bills on time which include car loans, mortgages, credit card bills, etc. First- time home buyers' credit history is usually based on their rent history. Unfortunately, credit scoring companies don't give ways for land lords to file their tenant's payment which real estate analysts see as a missed opportunity for the prospect homeowners to have good credit records.
