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FICO and the Credit Bureau Cartel

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Re: FICO and the Credit Bureau Cartel

#71

Post by vel0city »

ghaff wrote: post #65
vel0city wrote: post #62

Earlier quoted context omitted.

I'm definitely no expert on the law in every state, but from the states I know of there are central appraisal districts in charge of real estate tax appraisals. They already have to keep track of ownership of properties and their tax assessments, might as well just expand their domain to also include lien registries as well. I totally get it would be quite a mess and complication and issue with federalism to have the…

I'm not opposed to the idea but someone needs to hold the bag when mistakes are made and then you're essentially back to having title insurance in some form even if it's the general taxpayer that is doing the funding.

A large part of the cost of title insurance is because the current system of tracking such things is such a massive mess. If you massively reduce the likelihood of issues cropping up by having actually good systems in place, you don't need to hire the teams of people to actually look into the properties and find the irregularities and end up still missing things from time to time.

Just query the database. Are there any liens registered? No? It is clear then. Anyone that failed to properly file it in the database is just out of luck.

Insurance on something that constantly sees catastrophe is far more expensive than insurance on something that rarely ever sees problems.

Re: FICO and the Credit Bureau Cartel

#72

Post by hnburnsy »

WaitWaitWha wrote: post #43

> Even if a lender thinks the customer would be a good risk, the lender has to buy a FICO score regardless. This isn't completely correct. For a period I had no FICO score, yet I was able to secure a loan from a Credit Union. It did require me to show my assets and income flow, but the Credit Union was able to provide me with a loan. The score from what I have gathered when I learn really rewards those who remain in…

Most government securitized backed mortgage loans (which has 70% of the market) require a credit pull. Private or direct lending can have a different set of lending standards. From FNMA...

https://selling-guide.fanniemae.com/sel/b3-5.1-01/general-re...

>Credit scores are required for most loans purchased or securitized by Fannie Mae. The classic FICO credit score is produced from software developed by Fair Isaac Corporation and is available from the three major credit repositories. Fannie Mae requires the following versions of the classic FICO score for both DU and manually underwritten mortgage loans:

    Equifax Beacon® 5.0;

    Experian®/Fair Isaac Risk Model V2SM; and

    TransUnion FICO® Risk Score, Classic 04.

Re: FICO and the Credit Bureau Cartel

#73

Post by Workaccount2 »

balderdash wrote: post #51

The ridiculous thing is that the FICO score is so focused on commercial profitability rather than risk. You get lower score if you as a consumer optimise your cost of credit, price shopping/taking advantage of new rates/offers… it’s really a credit and likely profitability score

I have an 800 score while always being tight with my wallet.

The most valuable thing to lenders is someone who can 100% be counted on to always pay, even if things outside their control turn against them. People chronically fail to understand this, and end up putting themselves in financially precarious situations i.e. paycheck-to-paycheck living.

Re: FICO and the Credit Bureau Cartel

#74

Post by Workaccount2 »

nytesky wrote: post #42
rufus_foreman wrote: post #29

Earlier quoted context omitted.

>> seems like a startup opportunity "In 2006, the three credit bureaus decided they were tired of FICO’s position in the industry, and created a rival, called VantageScore, offering credit ratings for much cheaper than 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, de…

If all these loans are “guaranteed” by FM, ie US govt, why even have all these middle men taking a cut — why not do mortgages like Direct Loans from the govt?

"Creating jobs"

Re: FICO and the Credit Bureau Cartel

#75

Post by hnburnsy »

chollida1 wrote: post #32
steveBK123 wrote: post #12

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…

> 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 is a scam for two reasons...

1) The premium to risk cost is astronomical compared to other forms of insurance.

2) The owner's policy really only protects your equity (like if you put down 20%) but costs more or the same as the lender's policy (the other 80%)

Payout rates by insurance type:

title insurance - 1-2%

car insurance - 70-80% (lately close to 100%)

life insurance - 96-98%

homeowners - 60-70%

Re: FICO and the Credit Bureau Cartel

#76

Post by Zeetah »

Workaccount2 wrote: post #64
Aspos wrote: post #57

Twenty or so years ago Experian and FairIsaac were paid by USAID to help build credit bureau infrastructure in Kazakhstan. USAID also paid their legal departments to help draft a law which would govern the whole process. And guess what, in the result we got much fairer, more efficient, far more future-proof infra than the US has today. Gov licenses credit bureaus and runs its own one. Banks must report to all license…

I think the idea is in good spirit, but it's important to be aware that gov backed services often run at a loss indefinitely. It's impossible to compete with a business that doesn't need to make money to exist. So you end up with just the government service.

In many areas, the notion of government services operating at a loss doesn't make sense - police, fire department, armed forces, libraries, parks, etc.

Re: FICO and the Credit Bureau Cartel

#77

Post by Workaccount2 »

matwood wrote: post #46
Dalewyn wrote: post #4

Earlier quoted context omitted.

Pretty much, yeah. A credit score is a descriptor of the risk of financial loss when lending the individual concerned some money. So the only real way to grow and keep the score high is: * Pay your credit card and loan statements when they are due (late payments imply you don't have money). * Keep credit inquiries to the minimum necessary (an inquiry means you're asking for a loan, implying you don't have money). * D…

It's not about having/not having money, it's about propensity to pay. Obviously, people need money to pay, but someone can have all the money in the world and still default on loans by not paying.

This is an edge illogical case. Like technically you can sell your apple shares for $5/share, but no broker even has the functionality to let you voluntarily take a loss.

When someone with money defaults on a loan, it's usually because a.) they don't actually have money or b.) the loan is for their company, not them.

All that to say that "having money" is functionally equivalent to "propensity to pay".

Re: FICO and the Credit Bureau Cartel

#78

Post by stevekemp »

WaitWaitWha wrote: post #43

> Even if a lender thinks the customer would be a good risk, the lender has to buy a FICO score regardless. This isn't completely correct. For a period I had no FICO score, yet I was able to secure a loan from a Credit Union. It did require me to show my assets and income flow, but the Credit Union was able to provide me with a loan. The score from what I have gathered when I learn really rewards those who remain in…

I guess from a certain point of view you're right, a credit score is a list of all the debts you've had an how you've paid them back.

So somebody with no debt is "unknown", rather than the expected "good".

In Finland we don't have credit scores, instead we allow looking up defaults. Which seems like a reasonably sane approach - known-bad borrowers find it hard to repeat that behaviour, and somebody with no history of taking loans/debts isn't penalized.

Re: FICO and the Credit Bureau Cartel

#79

Post by Nifty3929 »

Lenders have to request a credit score from one of these agencies, because that's what Fannie Mae and Freddie Mac require.

This is about regulatory capture, which is of course entirely within the control of the regulators, and very indirectly by voters at the ballot box. We continue to vote for politician who allow this to continue.

We can't be taken advantage of without our (collective) permission. Let's vote for some folks that remove the regulatory capture and free up lenders (really loan originators, of which there are a great many) to compete for borrowers by (in some cases) dispensing with the credit score and other items.

Re: FICO and the Credit Bureau Cartel

#80

Post by ghaff »

WaitWaitWha wrote: post #43

> Even if a lender thinks the customer would be a good risk, the lender has to buy a FICO score regardless. This isn't completely correct. For a period I had no FICO score, yet I was able to secure a loan from a Credit Union. It did require me to show my assets and income flow, but the Credit Union was able to provide me with a loan. The score from what I have gathered when I learn really rewards those who remain in…

>The score from what I have gathered when I learn really rewards those who remain in debt and pay substantial interest,

Way back when, getting my first credit card was difficult--although there are a lot more credit options today.

But, at some point, you absolutely do not need to be in debt to have a good credit score. I guess technically, if you use credit cards and pay them off every month without paying any interest, you're in debt all the time but that's not what most people mean by "debt."

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