FICO Scores Too Traditional Says Digital Risk
FICO Scores Too Traditional Says Digital Risk
Many consumers would feel that their FICO scores are not very accurate in showing their capabilities in handlinga mortgage loan. In fact, experts from the Digital Risk believe that one’s FICO score alone is not capable of showing just how capable a person is in his financials.
All those who have a FICO score of 690 or better then you know that you can get any loan you want. Sometimes it can be pretty unfair how lending institutions seem to be very reliant on the scores in approving loans.
According to Digital Risk FICO scores have been unsuccessful in predicting the right amount of mortgages for clients for years. Many customers and critics believe that the financial institutions must find another way to measure the capability of individuals to pay for mortgages. Credit histories could be both misjudging and unfair.
According to Peter Kassaboy, the chairman and chief executive of Digital Risk, the industry is only relying on methods that are no longer up to date and risky. FICO high scorers tend to depend on their high scores to get cheaper and better deals than those who had already fallen into the Bad Credit category.
In a study conducted in 2009, the findings reveal 588,000 homeowners having to leave their houses in 2008. This marks 18% of the total economic downfall that occurred in the financial industry during the depression. The creator of the FICO score, Fair Issac, defends that the tool allows the lenders to determine if an individual will be capable of paying through measuring their credit and history and one disadvantage of the system is the strategic defaults it imposes on those with different scores.
However, Digital Risk says that strategic default is not the only problem. The company has introduced a system which they call the “Veritas” it is capable of determining the credit characteristics of clients. This is a tool that measures the behavior of a borrower despite his credit FICO score. It will provide lenders with the idea of how a borrower will be acting when he takes on a loan.
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Filed under: Credit • Credit Score
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