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Credit Talk
FICO Score Model Retooled
FICO has retooled their scoring models and the bottom line means
forgiveness of small slip-ups in paying your bills, but consistent
negligence will cost in drop of credit scores – and that could
impact your home loan mortgage options.
FICO® estimates their new system will help lenders limit their
default rate by between 5-15 percent.
The closure of the “authorized user” loophole, "piggybacking" on
someone else's good credit, is part of this retooling.
forgiveness of small slip-ups in paying your bills, but consistent
negligence will cost in drop of credit scores – and that could
impact your home loan mortgage options.
FICO® estimates their new system will help lenders limit their
default rate by between 5-15 percent.
The closure of the “authorized user” loophole, "piggybacking" on
someone else's good credit, is part of this retooling.
The purpose if this new scoring change is the response from lenders needing more efficient risk
management tools.
Scores will still range from 300-850, and the new model will continue to factor the level of credit owed,
payment histories, length of credit history, number of inquires into credit, and the type of credit used.
Consumers who currently are considered "low risk" due to a few late payments or over-limit situations
will score better with the new version, but "high risk" consumers will end up scoring lower and will find
it harder to secure favorable rates on home loan programs, auto loans and extending of new credit.
FICO®-08 has already been given to Experian, which has currently begun implementation,
TransUnion expects to have the model available to lenders to test during the 2nd quarter of 2008.
Equifax has disputes with Fair Isaac due its pending lawsuit with them, but intention is to distribute to
the three major credit bureaus.
management tools.
Scores will still range from 300-850, and the new model will continue to factor the level of credit owed,
payment histories, length of credit history, number of inquires into credit, and the type of credit used.
Consumers who currently are considered "low risk" due to a few late payments or over-limit situations
will score better with the new version, but "high risk" consumers will end up scoring lower and will find
it harder to secure favorable rates on home loan programs, auto loans and extending of new credit.
FICO®-08 has already been given to Experian, which has currently begun implementation,
TransUnion expects to have the model available to lenders to test during the 2nd quarter of 2008.
Equifax has disputes with Fair Isaac due its pending lawsuit with them, but intention is to distribute to
the three major credit bureaus.
Closing Unused Credit Accounts – Fact or Fiction?
If you have ever had a financial advisor or loan officer
of the most harmful actions you can take if you are trying
to achieve or maintain favorable FICO® scores.
Most loan officers and mortgage advisors are NOT well
versed on the FICO® scoring models. Actually keeping
open any credit you have established and will help you raise
your scores.
of the most harmful actions you can take if you are trying
to achieve or maintain favorable FICO® scores.
Most loan officers and mortgage advisors are NOT well
versed on the FICO® scoring models. Actually keeping
open any credit you have established and will help you raise
your scores.
You should not close an established, long-standing account even if you do not use them. The
fallacy is that a credit card account no longer in use will hurt you because you have the ability
to "charge" debt. While this is technically true, the FICO® modeling score is history.
CREDIT TIP: If you have not used your credit card in 6 months, it is generally a good idea to purchase
something using that credit card and then pay off the balance immediately. This will keep the
long-standing account current, and will be counted positively for your credit score.
fallacy is that a credit card account no longer in use will hurt you because you have the ability
to "charge" debt. While this is technically true, the FICO® modeling score is history.
CREDIT TIP: If you have not used your credit card in 6 months, it is generally a good idea to purchase
something using that credit card and then pay off the balance immediately. This will keep the
long-standing account current, and will be counted positively for your credit score.
Straight Talk on FICO Scores for “Authorized Users”
Fair Isac – the creator of the FICO® scoring model, has
recently determined that "authorized users" on credit card
accounts will no longer be scored in the same way the
"primary card holder" is scored and reported to the credit
agencies.
It will not matter if you have been an "authorized user" on
an account for 5 weeks or 5 years. If your credit score is
based on being an "authorized user" on any account, your
FICO® score will change!
recently determined that "authorized users" on credit card
accounts will no longer be scored in the same way the
"primary card holder" is scored and reported to the credit
agencies.
It will not matter if you have been an "authorized user" on
an account for 5 weeks or 5 years. If your credit score is
based on being an "authorized user" on any account, your
FICO® score will change!
The primary user of a credit account will not be affected by this change. However, for "authorized
users" who had counted on FICO® scores being raised by the good credit of primary cardholders, this
could be a very serious change in the way potential borrowers view your credit worthiness.
What does this mean when trying to qualify for a mortgage? It is possible if the credit score of the
borrower cannot stand on their own credit worthiness, it may be difficult to be approved for a
mortgage.
If you have any further questions on your FICO® score and how it could affect your ability to
qualify for a mortgage, please contact me for additional assistance.
users" who had counted on FICO® scores being raised by the good credit of primary cardholders, this
could be a very serious change in the way potential borrowers view your credit worthiness.
What does this mean when trying to qualify for a mortgage? It is possible if the credit score of the
borrower cannot stand on their own credit worthiness, it may be difficult to be approved for a
mortgage.
If you have any further questions on your FICO® score and how it could affect your ability to
qualify for a mortgage, please contact me for additional assistance.
Chicago Illinois Home Mortgage Lender