Stripped Bare - Beneath the Feel Good Veneer of Subprime Lending

Chapter 10 - What’s the Score?

In addition to credit grades, which were discussed in the previous chapter, credit scores were also considered in subprime lending, though subprime borrowers’ credit scores were not as heavily weighted as the credit grade when subprime lenders set loan-to-value limitations.

What, exactly, is a credit score?  A credit score is a computerized, statistical method of reviewing an individual’s credit usage.  The computerized review of an individual’s credit trade lines generates a credit score for each individual credit user, and the most commonly recognized credit score is known as the “FICO” score.

Both prime and subprime lenders consider credit scores to assist them in making either a yes I will lend to this person, or no I will not lend to this person, decision.  Credit scores can range between three hundred (300) and nine hundred (900), though the lowest credit score I personally ever noted was 417.

Needless to say, the higher your credit score, the more apt you are to be approved for a loan, and the more attractive interest rate you will receive from the lender.  If your credit score is below five hundred (500) though, don’t bother contacting any subprime lender, because with a credit score below 500 you will not qualify for a mortgage.

The credit scoring technology utilized today is attributable to Fair Issac and Company; this is where the term “FICO” arose from; and the majority of mortgage lending institutions, including banks and other financial entities such as insurance companies, utilize the software and scoring methods developed by Fair Issac and Company to determine individual credit scores, and utilize this score as part of their decision making process.

Posted by on 04/07 at 06:10 AM

Name:

Email:

Location:

URL:

Smileys

Remember my personal information

Notify me of follow-up comments?

Submit the word you see below:


Next entry: Stripped Bare - Beneath the Feel Good Veneer of Subprime Lending

Previous entry: Stripped Bare - Beneath the Feel Good Veneer of Subprime Lending

<< Back to main