The latest news out of Washington is that the Federal Housing Finance Agency is encouraging Fannie and Freddie to smarten up on credit scores, theoretically allowing those with currently skimpy credit files access to government-backed loans. Because getting more people into the mortgage game worked out so well the last time.

Washington correspondent Ken Harney lays it all out (see article at right). It’s something the government has been encouraging the GSEs to do for a while. The current analysis and judgment systems are outdated and unfairly – perhaps even discriminatorily – biased towards the “average” American.

Those with limited credit profiles have resultantly limited scores. This includes first-time buyers and minority applicants, as well the unbanked and underbanked. Should an applicant without a credit history be denied a mortgage? It could be argued (and is) that a person without credit debt, without student loan debt, without even a car loan, is entirely capable of managing their money and at no risk of defaulting on a mortgage.

It could also be argued (and is) that without a history of payment, extending a loan for a purchase as enormous as a house puts the lender, and eventually the GSEs, at an unsuitable risk.

The sheer volume of mortgages backed by the GSEs is astonishing and there’s a lot riding on their security. A little poison in the well can have disastrous consequences. (See: The Great Recession.) On the other hand, more (responsible, qualified) homeowners is unquestionably good news for the national and local economies.

Here, as always, there is a middle ground (though we have no hope that Congress can find it). Fannie and Freddie’s systems are old and outdated, and along with every other institution in the world, they must be brought in line with market norms. The term “credit score” itself may be outdated; perhaps “financial payment history” is a more accurate description of what lenders want to see. Utility and rent payment histories are entirely relevant to what is currently called a “credit profile” and resultant score, and including them makes perfect sense.

Caution is the watchword – for loosening lending standards, opening credit score requirements and raising interest rates. Congress and the FHFA must be cautious as they proceed with including more financial information in credit scores, and lenders must be cautious in reviewing those profiles. This caution, of course, takes time and due diligence, but so does digging the country of the worst depression in living history.

Certainly there are a fair number of Americans who, when the entirety of their financial histories are revealed, will fit perfectly the profile of an ideal FHA recipient. There are also some who will remain borderline and need careful examination, and there are those who will still not be a good bet. Expanding the scope of an applicant’s financial history will make for a more comprehensive, cohesive and relevant whole, and we – cautiously – support it.