Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Don’t Get Sandbagged: Here’s Where the “New Credit Scorers” Are Watching You

Personal_Finance / Credit Cards & Scoring Apr 10, 2015 - 09:29 AM GMT

By: Money_Morning

Personal_Finance

Shah Gilani writes: In our talks here over the last week or so, we’ve been focusing our attention on so-called “Disruptors” – the catalysts of change that are impacting everything we do.

And one particular point that I made underscores just how wide-ranging these Disruptor-driven changes really are.

As I told you all last week, Disruptors are already changing how we communicate (smartphones), how we date (Match.com, eHarmony), how we mate (Tinder… or so I’ve heard), what we eat (genetically modified and so-called “super foods”), how we work (Monster.com, Jobr), how we get heat, cooling and light (fracking), how we get around (Uber and Tesla), how we get where we’re going (GPS) – and where we stay once we get there (Airbnb).


And tucked behind each one of these changes is a major opportunity to make money – and often an opportunity to turn life to your own advantage.

Here’s just such an opportunity: In the area of lending and borrowing, there are ways to “fix” your credit – or to develop a credit score if you’ve never had one.

And that’s the Disruptor secret I’m going to share with you today…

Forewarned Is Forearmed

One of the new developments in this slice of the credit market is this: New credit-scoring companies now provide nontraditional, credit-related data models to lending Disruptors. They’re also selling their new credit-scoring methodologies to traditional lenders – like banks.

Because lending Disruptors increasingly rely on new credit-scoring metrics to make loans easier and faster to get, established credit-scorers, like Fair Isaac Corp. (NYSE: FICO) – better known as FICO – are being forced to develop new scoring systems. That’s so their bank, mortgage and auto finance clients can compete with the “new” vanguard of credit-market players that are turning the lending market on its head.

These are the players we refer to as the “Lending Disruptors.”

What you need to understand is that many things you previously disregarded, or viewed as irrelevant, now matter a great deal.

In fact, the old maxim “It’s what you don’t know that can hurt you most” really applies here: These days, not knowing what increasingly will be used to calculate creditworthiness – the “new credit scores” – can lead to a self-inflicted borrowing wound.

In the good old days (or bad old days, depending on your perspective), credit scores were almost entirely based on such metrics as how much credit-card debt you had and your record of repayment, how you financed your car or education, your track record with your mortgage, and whether or not you had a tendency to make debt payments late or skipped them altogether.

Banks and traditional lenders mostly rely on FICO consumer credit risk scores as the most important metric in a consumer’s creditworthiness toolbox. That’s because FICO scores reflect loan amounts and payment histories on credit cards, mortgages, cars, student loans and personal borrowings – data that’s all submitted to, and modeled by, FICO.

The Game Changers

In the “traditional” market, FICO is pervasive: Fully 90% of U.S. banks in the United States make loan decisions using this credit scoring system.

But that’s changing.

New credit-scoring companies like VantageScore – a joint venture of credit bureaus Experian PLC (OTC ADR: EXPGY), Equifax Inc. (NYSE: EFX) and TransUnion Corp. – and Revolution Credit are changing the “inputs” used in ratings-systems models and presenting traditional lenders with new credit-scoring tools.

According to American Banker, VantageScore uses “so-called alternative data to evaluate consumers who cannot be scored using traditional criteria like timely credit card payments.” And RevolutionCredit “offers an alternative based on financial education. Consumers who sign up for the service – usually at the recommendation of their banks – are put through a series of online courses and tests on financial topics, the idea being that they will be more creditworthy once they complete the series.”

Nowadays, Big Data pipes deliver payment histories. They do so on our utility bills, our Internet and cable bills, our online shopping and payment habits, and on sales data from eBay Inc. (Nasdaq: EBAY) and other transaction platforms. That data is sold to third-party aggregators and directly to credit-scoring companies. Data is then modeled and run through proprietary algorithms to generate scores that are more “predictive” than their simple payment-history predecessors.

To keep up with the competition, FICO has had to build and test new models that they hope to make available by the end of this year.

Indeed, Dave Shellenberger, FICO’s senior director of scoring and predictive analytics, told American Bankerthat “using the new data [we] found that more than a third of previously unscorable consumers got above 620 on the new score, representing an acceptable level of credit risk.”

It’s all about modeling – to create “useful” credit-score insights. Said Shellenberger: “Because we’re an analytic company, it’s critical that the data is predictive of future payments.”

Whether you have “impaired” credit – or no credit history at all – understand the New Landscape in credit. Know that your day-to-day bill-paying habits – in fact, all your online purchase and sales transactions – are being gathered up and modeled to determine if you’re a candidate for a loan. And this is being pulled off by any number of the new lending platforms – as well as a lot of the traditional lenders.

Know this and you’re ahead of the game, because you may need to borrow from these folks at some point.

In the Land of the New Disruptors, knowledge is power – as well as an avenue to profit.

P.S. I encourage you all to “like” and “follow” me on Facebook and Twitter. Once you’re there, we’ll work together to uncover Wall Street’s latest debaucheries – and then we’ll bank some sky-high profits.

[Editor's Note: Shah likes to hear from you. Let us know what you think about the financial Disruptors he's been sharing with you. Just post a reply in the comment box below.]

Source :http://www.wallstreetinsightsandindictments.com/2015/04/dont-get-sandbagged-heres-new-credit-scorers-watching/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules