 Jessica
Mortgage Mentor
Joined: 08 Jun 2004
Posts: 613
Location: OHIO
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 Posted: Wed Mar 01, 2006 4:34 am Post subject: Alternative Credit Scores open up Credit Opportunities |
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Credit scoring tools like the FICO score help credit companies determine if there is any risk in offering credit. But borrowers may not always keep a record of the details required to generate a valid FICO score. In order to get rid off such discrepancies, the Fair Isaac Corporation has introduced another scoring tool apart from the FICO score. Other organizations have also come up with new scoring systems that are based on non-traditional credit data. This includes records of the payment of utility bills, rental units and payday loans.
A round-up of the various scoring tools used in the industry is given below.
- FICO Expansion Score:
This is a new credit score developed by the Fair Isaac Credit Services, a subsidiary of FICO. Alternative credit data like records of bank accounts, payday loan payments, installment purchase plans, etc are analyzed to calculate the score.
Unlike the traditional FICO score, the new score ranges between 150 and 950. This gives lenders a lot of flexibility while deciding upon the borrowers' creditworthiness. So consumers with poor credit profiles can at least afford to avail credit using the alternative scores.
- PRBC Score:
PRBC (Payment Reporting Builds Credit) is a credit bureau that provides a score based on consumer credit information. The bureau records the payment history in terms of rent, private mortgages, phone, utility, insurance premiums and child care payments.
The PRBC also provides other services through its partner, AccountNow. Through these services, customers can sign up in order to pay their bills. AccountNow then forwards the bills to PRBC which keeps a record of the payments. The PRBC can thus prepare the credit files of consumers and manage their accounts in return of the enrollment fees.
- Anthem Score:
It's a non-traditional credit score designed by First American CREDCO. It simplifies the underwriting process especially for borrowers with little or no credit history. The score depends on factors like borrower's payment history, its length and the type of payments.
The Anthem Score is a two-tiered scoring system with the first score coming from a non-traditional credit report. The second one is a numerical risk assessment score provided by the First American.
- eFunds:
It's the parent company of the ChexSystem Banking Clearing House producing debit reports. These reports give lenders an idea of a consumer's cheque writing history, cheque order history, account opening inquiries, deposit account collections and any account closed due to fraud.
Consumers with poor credit score are often denied credit. But with the help of these scoring tools, they get qualified for mortgage or other loans. However, these scores hardly help in case of payment delays, missed payments, collections or bankruptcies.
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jameshogg
Joined: 20 Dec 2005
Posts: 848
Location: nevada
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| Posted: Wed Mar 01, 2006 11:16 am Post subject: |
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Statistics say that near about 32 million Americans don't have sufficient information in their credit files to calculate standard credit scores.
In addition to that about 22 million Americans don't have any files at all. These 54 million people comprise of mainly the minorities, low income people, the aged persons, recently widowed or divorced and those who immigrated to US recently.
Earlier these people were either denied by the lenders for a loan or were charged high interest rates. But things have changed now and more and more lenders are accepting to use these alternative sources to assess the risk.
Obviously this is a major relief for people with 'thin file' or 'no file'.
James |
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