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seems like a startup opportunity - start with a well-defined subset of consumers where you can beat FICO in accuracy, then expand out. Don't compete on price, win on detail and quality.
Title insurance is a much bigger scam/cost. The various state & local taxes at closing are orders of magnitude higher. Not to mention brokers fees (which are somewhat being handled as of late).
seems like a startup opportunity - start with a well-defined subset of consumers where you can beat FICO in accuracy, then expand out. Don't compete on price, win on detail and quality.
Same reason IQ tests are banned and credit scores are only allowed to consider like 7 factors.
seems like a startup opportunity - start with a well-defined subset of consumers where you can beat FICO in accuracy, then expand out. Don't compete on price, win on detail and quality.
The problem is that your competition is engaged in anti-competitive practices. Any bank can make an underwriting model, and the large banks already have enough data to pull it off. They haven’t done it, and they won’t do it because the agreements they’ve made with FICO makes implementing that impossible and Government agencies require FICO.
If a startup wants to change this, they better get real good at lobbying because government policy is the biggest constraint.
I would point out that "400% increase in mortgage credit check fees" sounds probably a lot worse than the actual number - which is like.. $150 at the time you are getting a mortgage. Of all the fees associated with buying your average $400k home, I don't think the $150 credit check fee is the big pain point. Title insurance is a much bigger scam/cost. The various state & local taxes at closing are orders of magnitude…
The mortgage companies have to pay it even for applicants that don’t end up actually becoming customers.
seems like a startup opportunity - start with a well-defined subset of consumers where you can beat FICO in accuracy, then expand out. Don't compete on price, win on detail and quality.
Well the problem is that anti-"discrimination" laws will kill that startup if that "well defined subset of consumers" doesn't have enough black people. Same reason IQ tests are banned and credit scores are only allowed to consider like 7 factors.
seems like a startup opportunity - start with a well-defined subset of consumers where you can beat FICO in accuracy, then expand out. Don't compete on price, win on detail and quality.
As described in the story the fucking CREDIT BUREAUS themselves were unable to launch a competing scoring model due to monopoly lock in effects.
I would point out that "400% increase in mortgage credit check fees" sounds probably a lot worse than the actual number - which is like.. $150 at the time you are getting a mortgage. Of all the fees associated with buying your average $400k home, I don't think the $150 credit check fee is the big pain point. Title insurance is a much bigger scam/cost. The various state & local taxes at closing are orders of magnitude…
seems like a startup opportunity - start with a well-defined subset of consumers where you can beat FICO in accuracy, then expand out. Don't compete on price, win on detail and quality.
From TFA:
>Even if a lender thinks the customer would be a good risk, the lender has to buy a FICO score regardless. Mortgage bankers don’t carry the capital to hold the mortgages they make. Instead they make a loan, and then send it onward to the capital markets. First, the government guarantees most mortgages through Fannie Mae and Freddie Mac as well as other programs for veterans and first time homebuyers. Then, the government in turn sends these guaranteed mortgages to Wall Street. This complex process relies on a standard to price the loans, and that standard is FICO, combined with the credit information from the three bureaus.
Doesn't matter how accurate or inaccurate it is, if you're selling to Fannie Mae or Freddie Mac (which is the majority of mortgages) you HAVE to use FICO.
I would point out that "400% increase in mortgage credit check fees" sounds probably a lot worse than the actual number - which is like.. $150 at the time you are getting a mortgage. Of all the fees associated with buying your average $400k home, I don't think the $150 credit check fee is the big pain point. Title insurance is a much bigger scam/cost. The various state & local taxes at closing are orders of magnitude…
It’s an application fee so it applies just for trying to get a mortgage, which is entirely different. The mortgage companies have to pay it even for applicants that don’t end up actually becoming customers.