New Credit Scoring System
Do you need to worry about this mortgage grading change?
Probably you will not be affected by the big three credit scoring companies’ attempts to put away FICO and begin using VantageScores, because they will be using the same data to determine scoring.
However, because the algorithm is different and the FICO score is already widely used (75% of loans are made based on the FICO score), we will see some people get denied credit or get charged a higher rate because of the switch.
It’s not a big deal to the lenders, because what amounts to a handful of people to them, is unimportant if it helps them avoid the losers. However, if you are one of the handful of potential loan applicants that suffer, it’s important to you:
about losing out on good customers than they are about getting stuck
with bad ones. So if a few potentially good risks get wrongly qualified
as bad, lenders aren’t that worried as long as they avoid the
deadbeats. If you happen to be one of those good eggs who’s paying
higher interest rates or having trouble getting loans, though, you should worry.
Now, because so many businesses choose FICO (Fair Isaac) to rate customers, they may choose to stay with the status quo and VantageScores may be just another attempt from the big three (Equifax, Experion, TransUnion) to avoid paying FICO that fails from the outset.
Wall Street seems to think that VantageScores has some merit though, because Fair Isaac’s stock took a beating this week on this news. Only time will tell, but it would be in your best interest to pay close attention to this story in the meantime.
Related Links
Buying your first home in Sedona
Sedona Arizona is a great place to settle down and buy a home
You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
August 2nd, 2008 at 12:55 pm
[...] and the likelyhood of you being delinquent on any obligation in the next 24 months. Developed by Fair, Isaac & Company years ago the system has become a backbone of the credit system of the [...]