| Credit Talk |
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| Benchmark Mortgage | 1750 E. Golf Rd., Suite 310 | Schaumburg. IL 60173 Illinois Residential Mortgage Licensee |
FICO® is retooling 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.
By spring of 2008, consumers could start seeing the impact of credit score changes. FICO® has stated
it is their goal to speed up the rollout of this new scoring model in response to 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.
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.
By spring of 2008, consumers could start seeing the impact of credit score changes. FICO® has stated
it is their goal to speed up the rollout of this new scoring model in response to 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.
Closing Unused Credit Accounts – Fact or Fiction?
If you have ever had a financial advisor or loan officer advise
you to close unused credit cards? This can be one 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 to close unused credit cards? This can be one 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.
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 Issac – 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.
"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.
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FICO Score Model Retooled for 2008
