What you CAN’T see is hurting your borrower’s FICO^® scores

FICO scoring is the most misunderstood facet of credit reporting. Before undertaking any actions to improve your borrower’s score, it’s important that you first understand "why they have the score they have." The biggest surprise to most loan originators is that your tri merge report hides most of your borrower’s credit data.
 

“When you look at any tri merge credit file, you are able to see only 1/3 of the consumer’s actual credit history.”
 

It’s difficult, if not impossible to accurately assess your borrower’s credit file based on reviewing a tri-merge report, as the logic used in creating the report, hides most (two thirds) of the consumer’s credit data.  Here’s an example,
 

Most creditors report data to all three repositories (Experian, Trans Union and Equifax.) Every tri-merge report contains data from all three sources, but you don’t want to see three examples of every tradeline (three copies of each mortgage, car loan and credit card…) so CRAs employ a de-duping process often referred to as “pick and choose logic.” Essentially, all examples of a given tradeline are compared, and the most recent version containing the most derogatory data is selected and placed on your credit report. The other two versions of that item are suppressed and an abbreviation or code is added to the tradeline to reflect which repositories contain data from that creditor. The problem with this method is readers assume that what they see on their tri-merge report is the same data that appears on the other “hidden” repositories – rarely is this the case.
 

This is why you can conduct a line-by-line review of a file that has significant differences in the FICO scores between the three repositories and be unable to determine "why" the scores are different. The answer is hidden in the 2/3rds of the data you cannot see. This is also the reason why so many rescoring attempts end in failure. Credit Technologies created a simple, free solution to this problem. The Trade Comparison tool (Main>Credit Files>Other Reports>Trade Comparison) With a single mouse click, this process automatically compares the data on all three repository files and highlights the variations. We call this the ability to see “the data behind the score”. This makes it simple for you to determine why the scores are different, and what steps are required to reach the needed score goals.
 

Adding to scoring frustration, loan originators often develop “tunnel vision’ when assessing an applicant’s credit and scores, focusing on any derogatory items that may appear. Very often, those items (especially if they are more than 24 months old) have little to do with the negative score result. The answers lie in the factors or comments listed directly below each score value. These comments are listed in order of what had the most negative impact to the score. To maximize score improvement, you should focus on the top listed items.

In this example, although there are numerous delinquencies reported on this consumers file, they are all older and have little impact on the FICO score. As the factors indicate – the key to improving this consumer’s score is addressing the revolving ratio issues.
 

As with many things, the key to success is education – this is especially true with FICO scoring. To learn more about FICO scoring education and the advantages of rescoring, please visit http://credittechnologies.com/MortgageAlchemy.asp
 

FICO^® is a registered trademark of the Fair Isaac Company
 

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