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FICO and the Credit Bureau Cartel
31–40 of 136 posts
Re: FICO and the Credit Bureau Cartel
#32I 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…
> Title insurance is a much bigger scam/cost.
I wouldn't cut out Title insurance, I have two friends for whom it saved low 7 digits each due to fraud in one case and liens in another.
It's incredibly important in today's market and I can't see how you can call it a scam, unless you also view car/health/life insurance as a scam as well, in which case we just disagree:)
Re: FICO and the Credit Bureau Cartel
#33Earlier quoted context omitted.
> and take appropriate action Presumably the reason they have a lower score than desired is because they already failed to do this in one form or another. > "5 ways to quickly improve your credit score". Have no inquiries. Have no forced account closures or writeoffs. Have as much total open credit as you can without triggering the first two. Have at least one secured or unsecured installment loan open and then paid…
Thinking of my last loan application, they ask you if you own or rent and how long you've been at that address. Also current job and income and how long there.
At least in the UK this is done as well as pulling your credit score, traditionally it's not a factor feeding into your credit score. Banks check both your history of paying off debts and your ability to continue doing so, it doesn't matter how good your score is, if you ask for an unsecured loan that's 20x your annual income over the next 5 years it's going to get refused.
This is all somewhat complicated by recent products from credit agencies, which make use of the Open Banking standard to pull data direct from your bank accounts and use that data to feed into credit scoring as well.
Re: FICO and the Credit Bureau Cartel
#34I 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 article mentions that one in ten pulls actually convert into a mortgage, so actually each borrower is paying $1500.
Do you mean 1 in 10 paying $150 use the payment and 9 in 10 throw it away?
Re: FICO and the Credit Bureau Cartel
#35If you think this is a "capitalists being evil" problem and not an "regulators over-regulating" problem, you should pay particular attention to fragments of the article:
> It’s not that hard to come up with a model for underwriting that is reasonably accurate; any bank with scale could probably do it. But FICO uses trade secrets, copyright, patents, or restrictive contracts to block anyone from doing so.
> First, the government guarantees most mortgages through Fannie Mae and Freddie Mac [...]. This complex process relies on a standard to price the loans, and that standard is FICO,
> A few years ago, the Federal Housing Finance Agency (FHFA), which runs most housing finance for the government through its control of secondary mortgage buyers Fannie Mae and Freddie Mac, decided that it might want to create some competition for FICO. So it turned to VantageScore. Only, it got backlash from Wall Street, which didn’t want to bother changing their models for mortgage backed securities. Instead of allowing mortgage lenders to pick either FICO or VantageScore, FHFA simply required that lenders use both.
In short, the federal government essentially requires everybody to use the services of one specific private company. This company can raise prices not because it's anticompetitive, but because the government doesn't allow it to have any competition.
Perhaps, instead of trying to pass even more regulation, that government should just relax its restrictions and allow other participants on the market to compete fairly?
Re: FICO and the Credit Bureau Cartel
#36If you think this is a "capitalists being evil" problem and not an "regulators over-regulating" problem, you should pay particular attention to fragments of the article: > It’s not that hard to come up with a model for underwriting that is reasonably accurate; any bank with scale could probably do it. But FICO uses trade secrets, copyright, patents, or restrictive contracts to block anyone from doing so. > First, the…
> a "capitalists being evil" problem and not an "regulators over-regulating" problem
¿Por que no los dos? A cartel enshrining itself into law is Regulatory Capture 101.
Re: FICO and the Credit Bureau Cartel
#37If you think this is a "capitalists being evil" problem and not an "regulators over-regulating" problem, you should pay particular attention to fragments of the article: > It’s not that hard to come up with a model for underwriting that is reasonably accurate; any bank with scale could probably do it. But FICO uses trade secrets, copyright, patents, or restrictive contracts to block anyone from doing so. > First, the…
I don't think the solution is less regulation. When you let the banks play fast and loose with the rules, they will. See 2008.
The real answer is an open source credit model. We don't need a black box. Let private industry handle the credit line qctivity reporting part like they do now and just feed that info into an open source model. Done.
Re: FICO and the Credit Bureau Cartel
#38Earlier quoted context omitted.
The article mentions that one in ten pulls actually convert into a mortgage, so actually each borrower is paying $1500.
Do you mean 1 in 10 paying $150 use the payment and 9 in 10 throw it away?
> Only one out of every ten prospective customers ends up taking out a mortgage, so higher prices fronted by mortgage bankers add up
I read this as for every ten customers who get to a point where they get their credit pulled, only one of them end up closing on the mortgage (ie buying a house). Could be due to shopping around, negotiations falling through, or the other millions of reasons you could end up wanting to buy a house but not close the transaction.
Re: FICO and the Credit Bureau Cartel
#39I 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…
> Title insurance is a much bigger scam/cost. I wouldn't cut out Title insurance, I have two friends for whom it saved low 7 digits each due to fraud in one case and liens in another. It's incredibly important in today's market and I can't see how you can call it a scam, unless you also view car/health/life insurance as a scam as well, in which case we just disagree:)
It could be handled with a government maintained database for orders of magnitude less resources. There should not be giant title insurance buildings in every city.
Re: FICO and the Credit Bureau Cartel
#40I 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…
> Title insurance is a much bigger scam/cost. I wouldn't cut out Title insurance, I have two friends for whom it saved low 7 digits each due to fraud in one case and liens in another. It's incredibly important in today's market and I can't see how you can call it a scam, unless you also view car/health/life insurance as a scam as well, in which case we just disagree:)
I think what parent actually means is that there are better solutions for it than insurance. E.g. a central registry of ownership and liens would probably solve 99% of the cases that you need insurance for. The insurance is a scam in the way that there are technical solutions that would obviate the need for this "service", but that solution is against the interests of the service providers. Very much like tax returns, which are a solved problem in many countries for the majority of the population because the authorities already have all the data they need. Most people should not need to faff around with them. In the US however, the tax return lobby is strong and effectively prevents the government from making it easy...