|
Most anyone who has obtained
a home mortgage in the past 5 years or so has heard about credit
scoring. How many of you have been told "your scores are
great", or "if your score were 10 points higher, your
rate would be better by 1/4 point"? Probably most of you.
We in the industry started to become aware of
"scoring models", as they are called, as early as
1994. The use of scoring models in the mortgage industry came
about as the major secondary market players, known as Fannie
Mae and Freebie Mac, started to develop automated underwriting
systems. They had been in use for a long time for auto lenders
and credit card issuers.
The early creators of the automated underwriting
systems felt that, if someone could go to a Mercedes dealership
at 10 am and drive off the showroom floor an hour later with
a $100,000 car (still more expensive than homes are in many
parts of the country), they ought to be able to obtain a home
loan the same way. The logic in this should be obvious... after
all, cars are rolling stock, so they can disappear, they depreciate
and usually people don't live in them. Houses are attached to
a foundation, they usually appreciate and people usually live
in them. Using that logic, the industry should be able to make
the home buying process easier for everyone.
This theory sounds good, but it is only in the
last year that we have seen some relief from the mountains of
paper that go into loan files, and it is because the scoring
models have become more refined. Still, there is progress yet
to be made and the industry is grinding slowly in that direction.
Scoring models figure prominently in the future of how people
obtain home mortgages.
Most people know that most creditors use credit
report agencies for obtaining information on a person when they
have applied for any type of financing. However, there are actually
two levels of credit reporting agencies. There are three major
repositories of credit and background information. They are
Equifax, Experian and TransUnion. When someone obtains credit,
the creditor reports the payment history to these repositories.
This is usually done monthly but may be done on an irregular
basis. These repositories simply accept the information as it
comes in electronically and they DO NOT check the accuracy of
the information.
The credit repositories and other agencies also
maintain other background information on every person in the
country who has a Social Security number or other identifying
information. The other agencies may include the Department of
Motor Vehicles, the Medical Information Board, the FBI, local
law enforcement agencies, the county recorders for each county
(public records repositories), etc. Even the mortgage industry
has a central repository for borrowers and lenders who may have
been involved in fraudulent activities in the making of mortgage
loans.
Article continued at http://www.loanlinks.com/loanlibrary/credit_repair_scoring.html
| 
