Credit Score - (FICO)

Just about anyone who has obtained or attempted to obtain a line of credit in the past few years has probably heard about credit scoring and/or credit repairing. How many of you have been told "You have great credit scores", or "if your credit score were 15 points higher, your rate would be better by at least a 1/4 point"? The answer to that is probably most of you.

We in the credit repair industry became more aware of "credit scoring models", as they are called, and it goes back as early as 1994. The use of credit scoring models especially in the mortgage industry came about when the major secondary market players, also known as Freddie Mac and Fannie Mae, began the development of automated underwriting programs. They had been in use for a long time for the auto industry and the credit card companies.

Early creators of automated underwriting programs felt that if someone could go to a Mercedes dealership at 10 am and drive off the showroom floor just an hour later with a $100,000 car (still more expensive than most of the homes are in many parts of the country), they should be able to obtain a mortgage loan the very same way. The logic in this is obvious... after all, automobiles are a rolling stock, which means, they can disappear, they depreciate in value and usually folks like you don't usually live in them. Homes are attached to the foundation below them, they usually appreciate in value and people live in them. With that logic in mind, the credit industry should make home buying easier and accessible to everyone.

In theory this sounds wonderful, but it is only in the last few years that we have seen some relief from the mounts of paperwork that go into lending files, and of course the refined credit scoring models. Still, there is plenty of progress to be made and the industry is slowly grinding in that direction.

If you are reading this then you probably already know that most creditors use credit reporting agencies to obtain all the information they need on a person if they’ve applied for any type of line of credit. However, there are two levels of credit reporting agencies. There are the three major credit bureaus for credit and background information. They are Experian, Equifax and of course TransUnion. When someone attempts to obtain credit, the creditor immediately reports the payment history to these one or all three of the credit bureaus. This usually occurs monthly but may be done on a more irregular basis. These credit bureaus simply accept and record the information as it comes in electronically and they are not responsible for any inaccuracies.

The credit bureaus and other agencies also keep and maintain additional background information on anyone in the country who has a Social Security number or any other information used to identify that person. Other agencies may include the D.P.S., the FBI, the Medical Information Board, the local law enforcement agencies, the county recorders for each county (also known as public records), etc. Believe or not, even the mortgage industry has a central information repository for mortgagors and the mortgage companies that have been involved in fraudulent practices in the making of home loans.