FICO - FairIssac Credit Scoring
Fair Issac Credit Scoring is a sophisticated credit scoring system that compiles information in your credit file and compares it to other consumers to assist lenders in making loans. The system has been around for awhile and is currently used almost exclusively by the top Financial Institutions including Wells Fargo, BofA, Capital One, etc.,
For a number of years now Banks & Finance Companies have been using FICO scores to determine if they will make you a loan and how much they will charge you. Until recently Banks & Finance Companies kept the FICO information a secret and often at the last minute, just before an escrow was scheduled to close they would say gee Mr. Consumer, I am sorry but we have just discovered your FICO score has dropped and the only way we can continue to make this loan is by raising the interest rate by 2 or 3 points.
Naturally the Consumer has the option to back out of the deal, but lenders know it is not likely that you will. The practice of obtaining a last minute credit score before closing a loan is often deceptive, if for no other reason, the fact that you may have shopped around to try to find the best rate. Each lender you shop with insists on running their own reports on each of the 3 major credit bureaus, leaving behind an inquiry on each of your profiles and each inquiry can cause your score to drop. Not to mention the fact that your mortgage company can pay a small fee to get an immediate re-scoring of your profile. A last minute re-scoring by a lender can be very profitable since they already know, any inquires they made will now be included in the scoring.
Your score can also change due to changes in the market place and how you compare with other consumers.
Recently congress and others in the Credit and Finance Industries came to the conclusion that Consumers should have the right to know what is in their reports and what their FICO score is. Sounds great doesn't it? If you know your FICO score the lender can't pull a fast one on you right?
Wrong. Dead wrong.
Knowing your score will not help you because the information used to calculate the scores for the consumer and the information used by lenders is not the same. There are laterally thousands of different algorithms used by the Credit Bureaus to determine the scores they will give to lenders and since lenders determine what criteria will be used for calculating credit scores
Your Credit score is not automatically included your reports.
Your score is separate and you will be charged for it.
Even if you were turned down for a loan based on your FICO score, you are not entitled to a free score.
I will be adding more to this soon.
0 comments