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The many flavors of FICO:__Editions, versions, and variations

Established Contributor

Re: The many flavors of FICO:__Editions, versions, and variations


pcope24 wrote:

Do you know of any mortgage compaines using FICO 8 score for loans?


You won't find any.

 

 

The vast majority of mortgages are underwritten to the rules of one of the GSEs, and they require the use of three specific score models (EQ5/TU4/EX2).

 

Even in the cases where a bank intends to hold the loan, rather than selling it, they effectively always use those three scores (all their internal risk models are already setup for the Fannie/Freddie rules...)

 

Unless you're looking at a hard money loan or a really unusual credit union (that holds it's own loans), you just won't see anything else used today.

 

(And if a new scoring model is switched to at some point, it's possible/likely that the various score/rate breakpoints would be different.)

 

EQ8:850 TU8:850 EX8:850 EQ9:846 TU9:844 EX9:846 EQ5:802 TU4:765 EX2:826 - 2018-08-08
Message 141 of 143
Valued Contributor

Re: The many flavors of FICO:__Editions, versions, and variations

FWIW - Here is a comparison table on how VS4/VS3 and F9/F8 views some important scoring attributes

VantageScore.jpg

 

Below is a link to an article on Fico score distributions from TransUnion which compares Fico 04, Fico 08 and Fico 09.

https://www.transunion.com/resources/transunion/doc/products/resources/product-fico-9-risk-scores-re...

 Note the upward shift at the top end with the newer models.

TU Fico score comparisons.jpg

 

 

 

Fico 8: .......EQ 850 TU 850 EX 850
Fico 9: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
VS 3.0:...... EQ 835 TU 835 EX 835
Fico 8 BC:. EQ 892 TU 900 EX 900
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 142 of 143
New Member

Re: The many flavors of FICO:__Editions, versions, and variations

This is a new reply to an old thread, but that said:

 

FICO another other score credit report models measure payment behavior, not payment capacity.

 

Payment behavior answers the question: "will you pay us back?"

 

Payment capacity answers the question: "can you pay us back?"

 

Standard FICO, Vantage and other models do not factor income because that was not what Fair Issac and Co (FICO) was trying to understand when their models were created.

 

Credit score models are designed to measure the past historical patterns of payment behavior (facts within a credit report) to project the likelihood and probability of how someone will pay in the future. They measure repayment probability risk.

 

Income is a related and important input. That said, just because someone has the capacity to pay does not mean they will, due to personal habits and attitudes. Being a high income earner or high net worth individual means that one CAN pay with less financial stress. Logic suggests that they will pay because they can pay. Behavioral risk models like FICO measures how likely a person will pay.  How, from where, from how large a bank account, or under what terms the person pays is not what FICO measures.  That is where underwriting comes into play.

 

Underwriters look at a more complete view of someone requesting credit (credit card, mortgage or other installment).  That is where income, bank account levels and other factors - the capacity to pay - gets matched up with FICO scores. Underwriting standards and practices vary from lender to lender, hence the variance of different models (FICO, Vantage, and others...) and which version (FICO 8, Vantage 3, et al).

 

FICO is a scoring factor for credit decisions.  It is an important factor.  But it is likely only ONE of the scoring factors, not the only one.  When Chase, or Citibank, or any credit union pulls either a credit report or a credit score (related but not the same), they are likely combining and enriching it with income and banking information from existing or other sources.  You become aware of when your credit file is pulled, but often not from other sources that measure capacity.  Capacity is a factor, but behavior is as important if not more important.

 

Hoping that is clear and helpful.

Message 143 of 143