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     | Sunday, March 19, 2000 - 06:41 am  Denise Richardson sent this to me, so I thought I would pass it along. http://www.washingtonpost.com/wp-srv/WPlate/2000-03/19/125l-031900-idx.html "oh the times, they are a-changing" :)
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| | Sunday, March 19, 2000 - 10:02 am This appears to be amazing news. Is this the harbinger of change that I think it is, or am I presuming this to a more profound change than it actually is??
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| | Sunday, March 19, 2000 - 11:07 am I think you're viewing this as more profound of a change than it is. The title of this thread is misleading. Fannie Mae does not plan to stop using credit scoring. They plan to stop using the Fair, Isaac model and develop their own.
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| | Sunday, March 19, 2000 - 02:44 pm Touche, Sean, you are correct! But the big difference is that they plan to publish what goes into their model.
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| | Sunday, March 19, 2000 - 08:00 pm Great article, right on the money. So how long will it take? Can't wait for the day when FNMA dumps Fair Isaac.
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| | Monday, March 20, 2000 - 07:05 am It's probably less of a victory than it seems. Best case : FNMA develops their own scoring model, maybe even makes it public. Fair Issac will simply "tweak theirs" to make it as dis-similar as possible. Potentially, knowing how 1 model (FNMA) works, thus maximizing your FNMA score, MIGHT help you deduce how FICO works, thus MAYBE enable you to INCREASE your FICO scores...MAYBE. I predict Fair Issac will be spenind a lot of $ on congressmen to try to force FNMA to keep the model "secret"
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| | Monday, March 20, 2000 - 05:09 pm I predict the FNMA scoring algorithm will just take into account a lot of things the FICO algorithm doesn't. Like time on the job, time at your current residence, income-to-debt ratios, savings reserves, amount of your down payment, whether or not you have a savings account -- the type of things that are gleaned from an application and not off of someone's credit profile.
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| | Monday, March 20, 2000 - 05:57 pm Some of the information you listed is stored in your credit profile: they keep your address history, your employment history. These factors are considered in the "Basic" credit scoring models. And actually, FNMA and FHMC does take all of the above this into account right now in their current Fair Issac models. The rest of the information not already stored in the bureaus is definitely gathered from your credit application. Fair Issac does "customize" their models for FNMA and FHMC as well as individual lenders, and all of the things you listed are considered in those models. The material Fair Issac passed out at the FTC meeting went over these factors in detail. http://www.creditscoring.com/pages/forumtranscript.htm#page7
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| | Tuesday, March 21, 2000 - 03:01 am I don't want to 'split hairs' but the way the automated underwriting works is a bunch of factors are put into it with one of those factors being a FICO score. Fannie Mae's automated underwriting system is not a customized scorecard. All that Fannie Mae has said is that instead of using one open system that requires data from one proprietary system that they plan to 'reinvent the wheel' in order to have the whole system open to public view. And while a person's credit profile may contain indications of where that person worked in the past that information is rarely updated, frequently wrong and totally unreliable.
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| | Tuesday, March 21, 2000 - 05:28 am I don't think you are splitting hairs. But I must point out that all of that information is used, whether it is unreliable or not. And yes, FNMA uses a different version of Fair Issac's scoring models than do the bureaus. In fact, each of the bureaus customize their own scoring models. I have a friend who works at Equifax in Atlanta, and this is her job (to customize Fair Issac's model for Equifax). But to reiterate, FNMA and FHMC do use employment history, debt ratios, savings, etc., everything thing that is on a mortgage app is considered in their scoring models, the base of which was developed by Fair Issac.
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| | Tuesday, March 21, 2000 - 06:11 am To further split hairs, I think what Sean is saying is what "ASK MAX (Experian web site) says below. Specifically, your length at address, employment history, etc is absolutely part of the FNMA and FHMC scoring methodology; however, the lender uses applicant supplied information (verified, of course) to plug into their "tweaked" scoring software (and, as Sean states, along with the "raw" FICO score from the CRA). This type of "identifying" information on your CRA files is, as stated, usually wrong and seriously out of date...and thus cannot be relied upon (my Experian, for example, lists 22 entries (I've only worked for 7 different companies) for my employment history....every damned one of them wrong in some way: spelling, location, dates, etc.. ============ FROM ASK MAX: " Unless there's an indication of fraud, only account information affects your ability to obtain credit. Variations in your birth date, employment information or previous addresses have no affect on risk scores based solely on your credit report. Creditors sometimes report employment details when your credit application is processed. However, changes aren't routinely reported to Experian with your account information, so the information may become outdated. We list the date the employment information was reported to us, but it's not intended to verify your employment history."
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| | Tuesday, March 21, 2000 - 08:08 am Good Link! I find it interesting that Experian is saying they don't take this information into account for credit scoring when Fair Issac says they do (again, this is what they said at the FTC meeting). While Experian may not use your address and your employment history for verification, in my view, we aren't talking about employment verification in this instance, so that seems strange to me to poin this out. The credit bureaus do have employment verification services which are seperate from credit reporting. Hmmmmmmm. Thanks for agreeing with me that Fannie Mae and Freddie Mac do take the factors Sean listed above into consideration. That was really my whole point in the first place! :)
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| | Tuesday, March 21, 2000 - 04:50 pm There is no credible evidence I've seen that suggests that generic FICO scores take into account employment history or time at residence. There aren't any adverse action codes for these items. What are you going to get as an explanation for why you didn't score higher if your credit is perfect, but you've only been at your current residence for one month?
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| | Tuesday, March 21, 2000 - 07:49 pm When we hear "credit scoring" we all automatically think "FICO". In reality, what we know as our FICO scores are the ones presented to us by Experian, TransUnion, and Euqifax. Each of these companies have slightly different versions of Fair Isaac's predictive models for their various scorecards. From a marketing perspective, they even differentiate their scoring methodology by branding them differently. Think of these as "generic" FICO scores, based only upon account information. Now, for a mortgage lender or guarantor, such as Fannie or Freddie, there is more to a person than just the generic score, which primarily deals with only repayment habits and account management. They are, quite so, concerned about debt-to-income ratios, length of time on the job, address stability, the property itself, etc. which are not included in the generic FICO scoring routines. That is where the next level of credit scoring comes in. Most people on this board will think of credit scoring as how they pay their bills, credit-used to creidt-limit ratios and such. That is where our generic FICO scores come from. Country wide Mortgage wants the entire picture which includes attributes not considered by the generic scoring mechanisms. Rightfully, their enhanced credit scoring systems simply take into account the factors extraneous to the "generic" or "raw" FICO scores. As Sean alluded, the generic FICO score is only a PART or a data element in the comprehensive score that is the result of automated underwriting systems. The most extreme example I could concoct would be someone with a 800 FICO score.....give that person a mortgage, right?? What if that person lost their job last week? That person's ability to get the mortgage just went to hell, because irrespective of their FICO score, their ability to repay is now at issue (but they may STILL get the loan, depending on other factors). This is an attribute that the generic FICO scoring mechanisms don't account for. The trap is that most of us use the "credit score" terminology of generic FICO scores interchangeably with the "credit score" terminology of scoring mechanisms that are more comprehensive in nature. For discussion purposes, that is probably OK, but for gettting a mortgage, it is a distiction that is probably worth noting.
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| | Wednesday, March 22, 2000 - 06:01 am Lynne, (Countrywide, eh? - good company) yes, I agree that the generic FICO scores used at the bureaus don't take in account all the information which you can get from a loan application. Actually, I'm just repeating what was said at the FTC meeting by the Fair Issac rep, that employment and address history are taken into consideration in generic FICO scores. They also handed out literature (that I still have) which said this. Maybe the information they gave out was wrong, but to me this seems like a credible source.
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| | Wednesday, March 22, 2000 - 04:12 pm Well, Kristy, I'd say you got your information straight from the horse's mouth -- more appropriately, the horse's a*s in this case ;) As you say, your source is, by credentials, certainly credible, and I will incorporate this into my "knowledge". It's not the last time we'll get conflicting information from these guys. I guess I'm too cynical, but I believe that the CRA's, F-I, and lenders actively engage in a campaign of disinformation and misinformation in order to keep the natives (that's US) restless, confused, and at bay. Conspiracy?? Probably, in a loose, plausibly-deniable collusion sort-of-way.
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