fico9Happy September Everyone!

It appears this year is moving so quick and the only constant thing is CHANGE.  In the credit world, we see clients who are still dealing with some past issues and troubles. In the current economy, people are just starting to recover from the credit meltdown.

When it comes to credit reports, many times the small issues are overlooked and can be the largest troublemakers. These small issues could be one medical collection or even a “paid” collection that continues to be considered negative to the overall file and score(s).

When it comes to consumer credit, “everything counts”, no matter how small it may seem.  Some of the solutions to collection issues require a specific strategy; unique to each client. We have assisted over a thousand clients with these types of issues and they were successful with acquiring a loan. In ensure their success; each client required a specific action plan.

Many of you recently contacted us regarding the release of FICO Score 9 and how it will impact a borrower’s credit profile. There was much excitement about the new platform and the media went crazy promoting it.  However, the hard fact is the lending world can be very resistant to a new “un-tested” score model.  I have included a very well written article that explains the challenges of implementing a new model and why.

Please keep us in mind if you should have a client or friend in need of credit advice or strategy. Credit is at the forefront of financial transactions these days, so solving issues for a client is a win/win for everyone.

Harry Snedden

ScoreCrafters, LLC

New Credit Score Model Would be Great for Housing! Too Bad it Won’t be Used

Posted to: MND NewsWire Friday, August 29, 2014 10:52 AM

 FICO, the company that develops proprietary scoring models for credit bureaus and lenders, announced August 7 that a new model (FICO Score 9) would be released this fall.  FICO’s press release caught buyers’, Realtors’, and lenders’ attention, as the new model was touted as significantly more “borrower friendly”. Paid collections would no longer impact credit scores.  Medical debts (paid or not) would hurt scores less as well.  FICO predicted some consumers’ scores could rise by 25 points, an amount that would significantly reduce their loan costs or interest rates.

The pending changes (which followed a CFPB study on the fairness of FICO’s scoring models) ignited a frenzy of optimism from Steve Brown, president of the National Assn of Realtors who gushed they would “make a real difference in the lives of millions of American who have been shut out of the mortgage market or forced to pay higher mortgage interest rates because of flawed credit scores.” Fanfare aside, the reality is that the changes are unlikely to impact credit scores for the foreseeable future.  Fannie Mae, Freddie Mac (the GSE’s), and lenders currently use three scoring models, and have shown no interest in switching to FICO Score 9.  Those models (Equifax Beacon 5.0, Experian FICO V2, and Transunion FICO Classic 4) have been the norm since 2009.   That same year FICO unveiled another “improved” product touted as “consumer friendly” (FICO 08), but neither the GSE’s nor lenders opted to adopt it.  In other words, all of this has already happened before and it did nothing to help the housing market! FICO says their new model more accurately evaluates consumers’ credit (just as with FICO 08), but until it’s put into national use by the GSE’s (and, by default, lenders), FICO Score 9 is essentially a curiosity.

There are large costs to rewrite automated underwriting programs for new score models, and (more significantly), higher default risks if FICO’s conclusion of more “accurate credit evaluation” proved to be inaccurate.


While loan officers, home buyers, and Realtors would love more accessible, affordable loans, FICO Score 9 won’t be boosting housing sales anytime soon.  Our recent mortgage meltdown leaves little industry appetite for additional credit risk.  While FICO Score 9 could well be hugely popular with consumers, it’s irrelevant unless the GSE’s embrace it.  Until then, buyers should keep paying those medical bills and avoid collections to ensure their loan approvals!

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