As
you probably already know, the "Big 3 Credit Bureaus" are making
required changes to the criteria used to report a tax lien and/or civil
judgment.
It
is anticipated that already reporting tax liens and/or civil judgments that do
not meet the new criteria will be removed from the 3 consumer credit reporting
agencies data.
So,
when that happens, all consumer credit scores that use this data will be
effected.
Will
my FICO score go up?
That's
hard say without more information.
I
decided to go direct to the source, so I went to FICO.
And what I found was shocking.
Until
you think about it.
Then
it's not shocking.
It makes perfect sense.
To
those in the mortgage arena, how many credit reporting judgments or tax liens
have been the only reason you could not approve a potential client?
As
the owner of a relatively large credit restoration company, I work with a very
large number of Mortgage and Real Estate Professionals. When calling to discuss
these changes with them, our conversation on the topic always starts the same
way. From young, fresh, excited L.O.s all the way up to CEO's of major mortgage
companies, banks, and credit unions, they all immediately want to know
"How will this affect my customers credit scores"
My answer is always the same- It
probably won't.
We'll come back to this, but first-
FICO'S FINDINGS
On
FICO's blog, I found the results to their recent research and learned what type
of credit score increase we can expect to see with the removal of these types
of public records.
The results were very shocking and very
similar for all three of the Big 3 credit reporting giants.
"Our
results showed that NCAP-related public record removals have no material impact
on the aggregate population to the FICO® Score’s predictive performance,
odds-to-score relationship, or score distribution.
For
example, the figure below compares the FICO® Score 9 distribution on the total
US population before vs. after NCAP-related public record removal; the two
distributions are nearly identical.
-Based
on FICO’s analysis, only 6-7% of scorable credit files are impacted,
and
these files are very likely to have additional derogatory information on their
credit file.
-Therefore,
impacted files tend to score relatively low, even after these
public
records are removed, and more than 75% of FICO® Score increases are
less than 20 points.
Since
we determined that few consumers were impacted, and the vast majority of those
impacted
consumers had other derogatory information and FICO® Scores that remained low,
the
ability of FICO® Scores to rank-order risk on the total population prior to
these public records
being
excluded is almost identical to what lenders would experience with these public
records
excluded.
Our
analysis also showed that volumes above or below score cut-offs remained
virtually unchanged on the aggregate, and there was no material impact to the
bad rate at a given FICO® Score.
While
lenders are encouraged to conduct analyses quantifying the impact of
NCAP-related
public
record removals on their own portfolios, they may find that they do not need to
make
notable
changes to their strategies." source FICO Blog
____________________________________________________________________________________________
It doesn't make sense. At first.
Common
sense says when you remove a public record, your score will go up, right?
That's
what all the self-proclaimed "credit repair experts" out there will
tell you.
But
think about it, it makes sense.
Remember
the question we were going to revisit?
How much will my clients scores go
up?
Or,
better yet, how much will MY score go up?
It probably won't, and here's why-
If
you have a judgment or tax lien, it is probably not the only negative account
you have.
Or,
for our mortgage pro's, when was the last time the only thing effecting your
customers credit score, or the only reason you couldn't offer an approval was
because of only a judgment or tax lien.
Probably
never.
Even
though a public record can hold more weight than other negative accounts, as
many as 93% of the credit files that contain a public record also contains
other negative accounts. These other negative accounts are also effecting the
scores and keeping them below the credit score required by FHA and the mortgage
industry.
And
of the small 7% that did see an increase when a public record was removed, 75%
of the 7% experienced an increase of less than 20 points.
So,
in 7% of the cases there was a 20 point increase. Hardly enough points to get
excited about, but the fact that they will no longer report is! If your scores
are not moving in the direction you want and deserve, feel free to call us for
a No Cost, No Hassle Credit Evaluation at www.700creditrepair .com or
www.700creditrepair.com.
if
you have any questions, need advice on removing any that are NOT removed, feel
free to contact my team at info@700creditrepair.com , by phone at 972.279.0444
or contact me direct at billy@700creditrepair.com.
Billy
Alt
Founder
/ President
700
Credit Repair
www.700creditrepair.com
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