Video 09 – Credit Scoring Basics

Transcription of Video 9 Credit Scoring Basics

We’ll talk about the credit scoring a little bit. Does anybody have any idea how many different credit scoring models there are? Fico, Fair Isaacs and Company, you see Fico all day long. You guys see the real estate Fico. Fico has 28 different scoring models. Just to keep things simple for consumers so we know what are scores are. Your credit score for a credit card is gonna be different for a car. It’s going to be different for a house. It’s going to be different for insurance. You have different scoring models depending on the application. Ok, now when you look at a consumer credit report, they go to a freescore.com or Credit Karma, one of those. Those we affectionately call Fakos. That’s a similation of a Fico score because the Equifax, Experian, Trans Union, they don’t generate scores by themselves. Fico is a separate company. Everytime they a generate a score, they’ve got to pay a licensing fee to Fico. Fico owns the alogorythms that generate the credit scores. So a Fake-o is a similation of a Fico. So they don’t have to pay a licensing fee. They’re usually pretty close. Sometimes you’ll see a fairly broad difference. I’ve seen them up to 50 points off. They are usually within 10 or 20 points. So it’s a good indicator if somebody doesn’t want to pull a credit report just to kind of see where they’re at. If it’s 580, they’ve got work. If it’s 720, you’re probably pretty good. But it’s important to know that there’s differences in those scores.

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