What is REALLY going on?

[Anonymous]

Yesterday I went to a subprime lender because I needed a chunk of money to relocate my mom. Anyways over the past months I been on a crusade to get my FICO 8 scores from the 520s to close to mid 640s , because every website or forum is all you hear is FICO 8 like it's our blood. Well I checked my scores before I went and it showed ex.635 TU 628 EQ. 655. My FICO 9s and other FICO scores and vantage 3.0 are all from 660 to 695 but as we all know FICO 8 severely punishes for medical collections which I have 3 on my CRA's. Ok now getting to the point of all this. I asked for 3-5k they gave me 7k with title secure. Which I was expecting with my FICO 8 being at 635 which is the exp. 635 I thought they were going to use. Ok now the crazy part. The rep. Tells me they stopped using FICO and now using there own scoring model. I asked what score they came up with. She showed me it was 662. Now I checked all my FICO scores and bingo!! It matched exactly on my FICO 3 credit card lending score. Ok now a 662 score and I needed collateral?? Where is the cut off point that someone has to use collateral?? Why not the country stop using credit scores and every lender make u use collateral? I have perfect credit card utilization and perfect payment status. I don't agree with a 662 needing collateral. Are medical collections that much of a scam for lenders on our credit file and history? Now if they were to of pulled my FICO 9 ex. It's 693. What I still need collateral because medical collections are helping over paid hospitals and doctors? In a country where we should all have medical insurance? I hope some how some way medical collections are removed from everyone's credit file in the future. Any thoughts why I still needed collateral?. Thank you

[Anonymous]

I think your real question is at the end:

Any thoughts why I still needed collateral?

The answer is first that you didn't need collateral in some absolute sense that applies to all lenders.  Rather, this particular lender wanted you to have collateral, given its assessment of the risk you posed and its own internal policies for mitigating risk.  That risk assessment involved looking at your report, at a credit score generated from your report, and at your income.

Each lender makes its own assessments along those lines.  One lender might require no collateral, another might require a small amount, another might require a larger amount, and all might give different interest rates.

One thing you should be careful about should you go to various lenders (to get quotes) is that if you give them your social security number, that will likely result in a new inquiry (which may well lower your score further).

[Anonymous]

Yes understand. They did the hard pull and gave me the loan for 7k with a title secure. Was lucky to get the first try to avoid many hard pulls. Just not happy about the collateral with my score. But I can repay the loan easy. But going to stretch it out to one year of the five year term they gave me

[Anonymous]

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@Anonymous wrote:
Yes understand. They did the hard pull and gave me the loan for 7k with a title secure. Was lucky to get the first try to avoid many hard pulls. Just not happy about the collateral with my score. But I can repay the loan easy. But going to stretch it out to one year of the five year term they gave me

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1. It's a Sub-Prime lender... their models are based around taking on more risk than other lenders are comfortable with, so securing collateral against that risk is expected

2. Unsecured loans are much harder to get than you realize, especially now with fraud and default rates rising

3. That 662 is probably out of 900. Since the majority of people are in the top 30% of score range, your score is lower than probably 60% of consumers.

I was unable to secure an unsecured loan with 695 TU FICO08, 130k/yr salary, 14% DTI, and 12 year same career with steady increases because I had moved 4 months prior.

[Anonymous]

Well that explains it then. So I guess in 12 months even with close to 700 score if I'm lucky. I might as well just settle for a FHA mortgage. Even for just a 65k mortgage loan. Thank you

[Anonymous]

I also stayed away from the peer to peer online lenders. I didn't think I would qualify for those loans. Plus multiple hard pulls I was guessing

[Anonymous]

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@Anonymous wrote:
Well that explains it then. So I guess in 12 months even with close to 700 score if I'm lucky. I might as well just settle for a FHA mortgage. Even for just a 65k mortgage loan. Thank you

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Well... a mortgage has collateral... it's a house and land

I'm getting a conventional mortgage.

[Anonymous]

I think that any time one goes to a title loan lender they are going to require collateral, even with high scores. That is what they do. It's right there in the type of business. They prey on desperation. You may have had better luck with a credit union but it would have involved the risk of applying.

[Anonymous]

You should join a good credit union and do business with them.  This shows the value of knowing your actual scores.  Most good credit unions will give someone with your scores a line of credit or personal loan, CC and car loan as long as you have the income to pay it.  Car loan is the only thing you would need collateral for.

The problem is your using a lender that only deals with collateral because their customers don't have credit.  They also charge much higher interest.

[Anonymous]

Yes I agree . I will join a credit union. Thanks to everyone for advice