FICO CREDIT SCORES RULE!
For decades, the FICO score has been the dominant metric for deciding whether a borrower is creditworthy. When Valley residents apply for a mortgage, a car loan or a credit card, chances are that a FICO credit score is one of the first things a lender examines to make sure the creditor can handle to payments.
However, over the past few years, a new breed of online lenders and credit scoring firms have started developing their own methods of judging whether a borrower is a good bet.
James Koren, writing for the business section of the Los Angeles Times, said some online lenders are focused on consumers who don’t have enough financial track records to have a FICO score. Others simply believe that they have a better method.
Earlier this year, for instance, San Francisco lender Social Finance said it had dropped FICO from its underwriting process in favor of its own system, which takes into account such factors as what a borrower does for a living or studied in college. Other firms look at even more unorthodox criteria.
William Lansing, chief executive of San Jose’s Fair Isaac Corporation, the company behind the FICO scores, said some of these new ideas might prove out, but others won’t…and some are likely to face opposition from federal regulators.
Lansing was interviewed by the Los Angeles Times about the new world of credit scoring and why he’s not worried that the FICO score will fall out of fashion. He said along with credit scores, his firm also does predictive analytic software that lenders use to do lending and detect fraud. He said Fair Isaac incorporate anything the customer wants. For example, what about a Face book profile? Is there anything there that’s useful? It probably has more value than zero, but not a lot more.
Lansing said what FICO finds is anything that reflects personal responsibility tends to be highly correlated to your FICO credit score. If a person is a good driver, a good student, those things tend to be correlated to being a good credit risk.
The key to any good credit risk is the family that pays their bills on time.
If you are looking to buy a home and need financing for your mortgage, contact a local lender. They can help your get your credit score and many times can show you how to improve your FICO scores.
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