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Online lender offers mortgages to the FICO-challenged

Venture capital-backed Privlo uses ‘alternative’ documentation to extend mortgages to borrowers who are falling through the cracks

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With thousands of mortgage loan applicants being rejected each year because their FICO scores label them as risky candidates, one online lender, Privlo, is working to offer loans to “nontraditional” borrowers who may be falling through the cracks. Since its introduction in 1989 by Fair, Isaac & Co., FICO has become the credit scoring model most widely used by banks and creditors and is based on consumer credit files of the three national credit bureaus, Experian, Equifax and TransUnion. The exact formula for calculating FICO scores is a secret, but the scores assess various creditworthiness components, including payment history, debt burden, length of credit history, types of credit used and recent credit inquiries. FICO scores have long been criticized as being unfair or inaccurate. A 2004 report from the Federation of State Public Interest Research Groups found that 79 percent of all credit reports contained errors. Recently, FICO, government regulators and others have ...