Keeping Score of How the Credit Industry Works
Have you ever been confused about your credit score, or tried to figure out exactly how your score was compiled?
You’re not alone. Apparently, mortgage brokers who deal with credit scores everyday can’t figure them out either.
Here’s a post that should disturb you, from blownmortgage.com, a site where mortgage brokers share their experiences. In this case, the broker worked with a client who had pretty decent credit already, but took a few steps to make it even better, by fixing errors in the report and paying down some debts.
What happened? Her score dropped even lower. As she improved her credit, it went down, instead of up.
Here’s the broker, recounting his difficult conversation with credit rating agency representative:
He tells me it might HELP her FICO scores to have recent late pays.
If anyone can make sense of FICO please let me know.
That snippet tells us more than just one person’s nightmare experience. It’s another example of how little we all know, consumers and professionals alike, about decisions lenders and credit agencies make on a regular basis. And those decisions that have huge effects on our personal finances and on the economy. That’s been one of the overriding problems with the mortgage mess. We don’t understand yet many important – and basic – pieces of the housing puzzle, including questions like who really owns a certain mortgage, who are the investors, and who is responsible for the property.
Trying to stop foreclosures or renegotiate mortgages are both short-term ways to deal with the mortgage crisis. But if we’re really going to tackle it, we need to first make sense of how the financial industry itself actually works.