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The Thin Filed, Underbanked: An Untapped Source of Buyers

CUs are uniquely positioned to cater to consumers with "thin file" credit histories, and can do so without adding risk to their business.

By Tim Coyle | Updated on September 22, 2017

In a competitive financial services landscape, credit unions must embrace new types of consumers to survive. To that end, consumers with “thin file” credit histories are an untapped source of mortgage buyers, which credit unions are uniquely positioned to cater to. And by using alternative data to assess the creditworthiness of these individuals, they can do so without adding risk to their business.

When a bank offers a mortgage to a consumer, the eligibility requirements for the loan are typically established by an investor, like Fannie Mae and Freddie Mac, with the goal of repackaging a pool of mortgages into a mortgage-backed security for institutional investors. By comparison, many credit unions keep the mortgage on their books essentially as “IOUs” and don’t repackage loans. With the right credit risk decisioning processes in place, this gives them the flexibility to offer loans to creditworthy consumers otherwise passed over by banks.

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