In an effort to make processing sub-prime loans easier and faster, First Franklin introduces their new “LITE” credit program. Essentially this program provides applicants with a 640 credit score or higher to be qualified regardless of the number of trade-lines they have on their credit report.
 

Typically, lenders will “de-value” or ignore credit scores if the credit bureau does not contain enough accounts or trade-lines.
 

“Your credit score is a measure of your financial payment history”, said Sue Martinez, VP of Underwriting for Aurora Loan Services. “If a person has no accounts, has not borrowed money and therefore has no tradelines, the credit bureaus don’t have information to create a numeric score.”
 

Nothing exists in a vacuum
 

So how can someone have a 640+ score if they never borrowed? Simply, put….they can’t. What most likely has happened is that the person had credit, perhaps a small trade-line like a store charge card, which they paid on time. It may be that the credit has been closed for some time, but as required by law, the tradeline information remains on the credit report for 7 years.
 

Another means by creating a credit score for someone with no prior tradelines is to have that person added as an “authorized” user of another’s credit. When you were in college, did you parents add you to their gas card? Did they authorize you to use their Foley’s or Sears store charge card? You weren’t obligated to pay the bill to the creditor but then dad could impose more stringent collection methods.
 

The result is that you could have an applicant with very little tradeline history but a credit score of 640 or above.
 

Why is First Franklin going there?
 

Actually, First Franklin used to be there…and they OWNED that profile of customer. If you were to go back in time to 2000 and looked at First Franklin’s guidelines, you would have seen that they had no tradeline requirements and no payment history requirements. Back in the day, they were ALL ABOUT FICO SCORE. Does the customer have a 660 score? Then don’t worry about collections, foreclosures, etc.
 

First Franklin has long had a tradition of placing greater emphasis and reliance on FICO scoring than other ALT-A or sub-prime lenders. While it used to be their whole competitive advantage, the LITE credit program puts them back in the mind of loan officers for those niche transactions which would not be approved elsewhere for the applicant having too few or no trade lines.
 

Ken Stampe
© 2006 http://blog.homeloandfw.com