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.