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SAN
DIEGO, CA. – What do the new credit scoring models,
recently announced by the three major credit reporting
agencies (CRAs) mean for consumers in 2006
"Not much." was the answer from many industry observers
and experts to hundreds of questions ICFE has received
from financial counselors, especially military counselors.
Here is a typical inquiry received at the ICFE.
Question: "I just read that Experian, Equifax, and
TransUnion merged their credit scoring procedures changing
the numbers from 350/800 to 501/990. How is this going to
affect the FICO scoring system and credit reporting in
general?" from Angel Dominguez, a USAF Career Readiness
Consultant, in Enid, OK.
ICFE asked Craig Watts, the public affairs manager at
FairIsaac, about the changes. Here is his reply.
"The credit bureaus' newest risk score raises some
interesting questions, but as is always the case in this
industry it will be a long time (at least six months, more
likely several years) before anyone knows if the score is
going to be a successful competitor to scores such as the
FICO score that already are entrenched in lenders'
decision systems.
Until the government sponsored enterprises (GSEs) weigh in
on this new score - IF they decide to do so - the mortgage
industry and secondary market will continue to focus on
FICO scores. The best known GSEs are Fannie Mae and
Freddie Mac. Six years after the FICO score was
introduced, both GSEs finished their testing of the score
and advised mortgage lenders to begin using automated
credit scores - they referred to FICO scores and a
competing score -- in their loan underwriting.
So this announcement is a non-starter for consumers and
will stay that way until the bureaus can demonstrate that
a large percentage of big lenders have begun using this
new score to make consumer credit decisions. When Experian
rolls out this new score for consumers in a couple of
months, it will have the same value to consumers that
Experian's PLUS score has today - zero. That's because the
value to consumers from knowing a score arises from the
targeted lender also using that same scoring system.
You may quote me if you like, I ask only that you provide
enough context so my comment(s) aren't misleading. Craig
Watts Public Affairs Manager Fair Isaac Corporation 200
Smith Ranch Road San Rafael, CA 94903-1996 Phone:
415-492-5399
craigwatts@fairisaac.com.
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About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.icfe.info and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.
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