home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News


Mortgage News

HOT Topics









site map

twitter linkedin
facebook google+

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

Credit News | Bankruptcy Statistics | Credit Score Statistics
Credit scores, bureaus & technology. Bankruptcty activity. Credit-related lawsuits, announcements and coverage of F a i r Isaac, E q u i f a x, E x p e r i a n, F I C O, V a n t a g e Score & T r a n s Union.

Scores Vary Substantially Among Repositories

Consumer group releases study results

December 19, 2002

By MortgageDaily.com staff

A consumer group and credit industry trade group released a study on credit scoring inaccuracies and its affects on borrowers and lenders -- which were found to be both positive and negative.

The "Credit Score Accuracy and Implications for Consumers" study analyzed more than 500,000 individual credit files, and found that scores reported by the three repositories varied substantially.

The joint effort between the National Credit Reporting Association (NCRA) and the Consumer Federation of America is an attempt to point out inequities in the mortgage credit approval system and to weigh the impact of those inequities.

In the merged credit files that were analyzed, a number of inconsistencies were found.

When a lender plans to hold a loan in portfolio, he or she will order a credit report with scores from a credit reporting agency. That agency will compile the borrower's credit scores from all three credit repositories -- Experian, Trans Union, and Equifax -- using "merging logic," and will then supply the merged credit information to the lender.

The study found that among 1,704 of merged credit files studied manually, almost one in 10 was missing a credit score from at least one repository.

The same ratio out of 1,545 files had blatant mistakes such as credit activity of a totally different person in the file, or the file reporting the consumer as deceased. About one out of 10 files contained additional reports and information not relevant to a consumer's credit history.

Only 21% or one out of five of the total files had a range of fewer than 20 points between the lowest and highest scores; 31% had a range of 50 points or greater between scores; and 5% had a range of 100 points or greater between scores.

The average range between highest and lowest scores was 43 points, and the median range was 36 points.

Files with both good and bad credit were susceptible to large point ranges, although consumers with poor credit may be slightly more so, according to the study.

Merged credit scoring in mortgage lending protects borrowers from mistakes when omitted information, but it heightens the risk of borrowers being penalized for mistakes where erroneous information was added.

Accuracy in credit scoring is important to the mortgage lending process, the report said, and lenders heavily rely on Automated Underwriting (AU) systems for the approval process. But while AU systems are efficient, they do contain some shortcomings, NCRA said.

AU systems also can tell a broker right away if Fannie Mae or Freddie Mac will buy a particular loan. Since AU systems have become so integral to the mortgage lending process, it's important that credit scoring, a major factor for approval and at what price, be accurate.

Incomplete reporting of information, or an error in omission, can make a consumer appear either more credit worthy or less credit worthy, the report said. So not only is a false low score harmful to the consumer, a false high score is harmful to a lender.

The report conservatively estimated that 40 million consumers, or 20% of the 200 million with credit reports, are at risk of being misclassified into the subprime category, and at least 8 million of those would be misclassified upon application.

The study concluded that many consumers, especially those with very good credit, are unharmed by the inconsistencies found, and some may even benefit from them. However, tens of millions consumers are at risk of being penalized for incorrect information in their credit reports, in the form of increased costs or decreased access to credit and vital services.

The study suggested several ways to improve the system, including establishing meaningful oversight of the development of credit scoring systems. It also includes recommendations to help consumers stay on top of their credit report.

Credit scoring was introduced by Fair Isaac and it developed three different credit scoring models specifically for each repository: the FICO score for Experian, the Empirica score for Trans Union, and the Beacon score for Equifax. The term "credit score" also is commonly referred to as "FICO score," according to Fair Isaac.

SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders