Page 7 - EQ Mag-issue 5
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CREDIT RESOURCE



     VantageScore Can Help



     Expand Homeownership




     By VantageScore



     WHAT CREDIT SCORE COMPETITION MEANS FOR YOUR                      purpose credit scoring model in the United States.
     MORTGAGE LENDING EXPERIENCE                                    ·  VantageScore  is  owned  by  all  three  credit  reporting
     Credit score competition is coming to the mortgage industry but   companies—Equifax, Experian and TransUnion—but is
     what does this mean for you, your family and friends? It means we   independently managed.
     now  have  the  power  and  potential  to  expand  sustainable   ·  VantageScore is highly accurate and scores 40 million
     homeownership opportunities to millions of Americans currently    more consumers than conventional models. Therefore,
     disadvantaged by traditional credit scoring models.               more consumers get access to mainstream credit at fair
                                                                       prices.
     How will it affect me?
     Model competition will result in more accurate, reliable, inclusive   Allowing updated models to be used in the mortgage market will
     and updated mortgage credit scores, which means significant   help create an environment where companies will keep pushing
     benefits for you.                                           one another to build more advanced scoring models that take into
                                                                account of the current economy and how people use credit today.
     The way consumers use credit has changed, but traditional credit   The end result: more accurate credit scores that drive sustainable
     scoring models have not adapted to these shifting behaviors,   homeownership opportunities and less defaults.
     resulting in millions of Americans being penalized and unjustly
     denied mortgage loans.                                     Why is it important?
                                                                VantageScore and other credit score model developers may now
     With credit score competition:                             have an opportunity to bring more predictive and inclusive credit
        ·   Pricing and interest rates extended by lenders will be   scores to the mortgage marketplace.
            more accurate and fair.
        ·   Millions more creditworthy consumers may be eligible for
                                                                    ·  Approximately  40  million  more  consumers  can  be
            mortgages.                                                 scored using VantageScore than other traditional credit
        ·   Millennials and GenZers will be more fairly assessed.      scoring models; 16 percent of whom are of African- or
                                                                       Hispanic-American descent.
     What happened?
     In August 2019, the Federal Housing and Finance Administration   ·  VantageScore  accounts  for  shifting  consumer
    (FHFA), Fannie Mae and Freddie Mac's regulator, issued a new       demographics and behaviors, enabling it to score more
    rule authorizing Fannie Mae and Freddie Mac to stop using the      than 10 million borrowers with a credit score above
    current outdated and exclusionary credit score models. (Fannie     620  (often  the  minimum  credit  score  required  for
    Mae  and  Freddie  Mac  are  responsible  for  facilitating  and   mortgages) that aren't even visible to the current models
    supporting the majority of U.S. mortgage originations.)            used for mortgages.
                                                                    ·  21% of Millennials have “thin files,” meaning they have
     They  now  are  considering  using  other  more  inclusive  and   less  than  3  active  credit  accounts;  something  that
     accurate credit scoring models when assessing credit risk for     traditional  models  penalize.  So  Millennials  are  not
     loan candidates.                                                  necessarily  less  creditworthy  but  less  inclined  to  use
                                                                       credit, a behavior that is unfairly punished by traditional
                                                                       models.
     VantageScore, which is used for all other loan types, is a potential
     alternative  under  consideration  to  the  current  required  model
     that's now in place. Here are a few facts about VantageScore:  The potential is huge – more homeowners (including first-
                                                                time home buyers) and more accurate credit scores! It's a
        ·   VantageScore was founded in 2006 on the pursuit of   win-win-win for consumers, lenders and the economy.
            creating the most inclusive, predictive and consistent all-



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