Major Credit Score Changes Are Here
The CORONA Virus Has Brought Some Changes To The Credit System
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Say Goodbye to FICO Scores | MAJOR Credit Score Changes
14,010 viewsAug 19, 2021
167K subscribers
SUBSCRIBEMAJOR Credit Score Changes | Say Goodbye to FICO Scores. For many years, the FICO score has been the dominating factor when it comes to banks lending. But recently, banks are starting to look at alternative ways of how they qualify people for lending, pretty much eradicating the use of the FICO score. With the lenders moving away from the FICO score, they will be relying on their own data to mitigate risk to borrowers and have their own perquisites before lending. So in this video we take a look at what could potentially happen and also dig into some nefarious stuff that one bank in particular is making things look into social credit…. 0:00 Intro 0:40 What is the FICO score? 1:50 What was FICO used so much previously? 3:35 What are banks looking at if not your FICO score? 4:08 How this will effect the housing market 5:40 Social Credit?! 7:42 Final thoughts 😃 Thanks for Subscribing & Liking our Video! 📧 Get Our 1:1 Real Estate Investing Coaching and Mentoring: https://thekwakbrothers.com/rcm-coach… ⌨️ FREE 7 Day Trial To PropStream Real Estate Investing Software: http://reisoftware.thekwakbrothers.com 📊 Pay Off Your Mortgage In 5-7 Years (On Average): https://www.youtube.com/watch?v=eGVn9… 📊 Get Our FREE Book “Break Free From Your Mortgage” https://acceleratedbanking.com/book 💻 JOIN OUR FREE FACEBOOK GROUP FOR LANDLORDS: https://www.facebook.com/groups/bestr… 🔊 Our Podcast: 🔹Spotify: https://open.spotify.com/show/7pnHJSN… 🔹iTunes: https://podcasts.apple.com/us/podcast… 📧 Hire the Kwak Brothers to Speak: info@thekwakbrothers.com #realestateinvesting #thekwakbrothers #realestate ======================== —DISCLAIMER— The suggestions, advice, and/or opinions that are given by Sam Kwak (The Kwak Brothers) are simply opinions. There are no guarantees of set outcomes. Listeners, guests, and attendees are advised to always consult with attorneys, accountants, and other licensed professionals when doing a real estate investment transaction. Listeners, guests, and attendees are to hold Sam Kwak, Novo Elite, Inc. and the Kwak Brothers brand harmless from any liabilities and claims. Not all deals will guarantee any profit or benefits. Listeners, guests, and attendees are to view and listen to all materials and contents furnished by the Kwak Brothers as a perspective based upon experience.
Major Credit Score Changes Are Here
FULL TRANSCRIPT
00:00for many years the fico score has been a00:01dominating factor when it comes to00:03borrowers applying for a new mortgage00:04credit cards and even auto loans but00:07changes are coming and big lenders are00:09moving away from using the fico scores00:11but instead relying on their own data00:13and metrics to determine the risk of a00:15potential borrower even fannie mae and00:17freddie mac the government-backed00:18agencies are starting to consider using00:20other types of data and other scores00:22when it comes to securitizing mortgages00:25so in this video we’re going to dive00:26into how this will impact the housing00:27market how this will change your ability00:30to borrow money in the future and what00:32could be the start of a social credit00:34system00:35[Music]00:40so fico scores range from 300 to 850 30000:44being really really bad and 850 being i00:46mean pretty much perfect and the highest00:48credit score i’ve ever seen was 835 so00:51i’ve never met a person with the perfect00:52850 fico score the way that fico scores00:55are primarily calculated are first of00:57all your payment history how well you00:58pay your loans on time second being your01:01credit utilization this is how much of a01:03revolving credit you use and how much01:05credit you use in general number three01:07is your credit file age meaning how old01:09is your credit the longer you have your01:11credit file and information in your01:12credit report the better as it gives01:15more predictability and data for banks01:17to go ahead and assess your risk number01:19four is your credit mix so how diverse01:21your different credit counts are do you01:23have auto loans mortgage student loans01:25credit cards the more diversity in your01:27credit file the better and last but not01:29least number five is new credit01:31essentially how many of your credit01:34cards and accounts are essentially new01:36fico scores have been a gold standard01:38for many many years for base success01:40whether a borrower has the ability to01:42pay back their loans but just like what01:44i mentioned earlier banks are moving01:45away from using fico scores in general01:48you see fico scores have been dominant01:49for a very specific reason and that is01:52because fannie mae and freddie mac has01:53been dictating that fico scores have to01:55be used when lenders are using a credit01:58score to determine and underwrite a02:00borrower when it comes to getting their02:02mortgages well for many banks and many02:04lenders they pretty much said you know02:06what if it works for mortgages it must02:08work for credit cards and auto loans or02:09because mortgages being a really high02:11ticket loan they pretty much thought02:13well it’s got to be the riskiest02:14therefore it could work for other credit02:16loans as well according to a recent wall02:18street journal article fannie mae and02:20freddie mac are now considering using02:22other type of scores such as vantage02:25score which is a rival score to a fico02:27score when it comes to underwriting for02:29mortgages you see something i haven’t02:31mentioned is that there are different02:32types of fico scores there’s fico 2 302:34and five five seven fico eight and a new02:37fico nine there’s vantage 3.0 score02:40national equivalency score there are02:42thousands and thousands of different02:43credit scores are out there but it just02:45happens to be that fico score has been02:47the golden boy because fannie mae and02:49freddie mac set so added with the fact02:51that millions and millions of homeowners02:53and borrowers have gone through mortgage02:55forbearance programs and loan deferments02:57program due to care’s act last year it02:59has completely thrown off the accuracy03:02and how data has been stored when it03:04comes to credit because the cares act03:06has allowed millions of homeowners and03:08borrowers to get into a variance03:09programs without any negative03:11consequences to their credit so03:13obviously the banks are saying well that03:14doesn’t really help our situation when03:16it comes to assessing risk so that has03:18ultimately resulted in banks looking in03:20other directions and other data which03:21we’re now starting to see individuals03:23with really low fico scores even getting03:25approved for mortgages and loans even03:27big lenders like synchrony financial03:29which they’re mostly responsible for03:31store cards are now moving away from03:33fico and has completely switched to03:35vantage 3.0 so what exactly are banks03:37looking at if they’re not looking at03:38credit scores well banks are starting to03:40look at deposit histories how often you03:42go into overdraft and they’re looking to03:44see what other financial credit and03:46products are using when it comes to03:48determining the credit worthiness and03:51risk of the borrowers this could also03:52lead into banks wanting to look at what03:54kind of job you have they may want to03:56see how much money you got stored up in03:57your checking account or your savings03:59account and how large your deposits are04:01and how often those deposits are when it04:04comes to pretty much determining the04:05risk as a borrower so i’m going to04:07change up the gear a little bit and talk04:08about how this will impact the housing04:10market and the real estate market in04:12general so first of all this could be a04:14really great news for individuals with04:16great income history deposit history04:17they rarely get into overdrafts maybe04:20have they have really good jobs but they04:22may not have a good credit history so04:24that’s a good news for them as banks are04:26increasingly looking at other data and04:28they might not look at credit history as04:30much so these individuals may get04:32approved to go and buy a home therefore04:35we may see an increase of demand and04:37also more purchases down the road but on04:39the flip side this change can exclude04:42individuals with great credit but they04:44may suffer in terms of deposit histories04:46income and other factors outside of04:48credit to me i see this going in one or04:50the other way the first being is that04:52we’re going to see a lot of borrowers04:54with bad credit getting approved for04:55mortgages which would drive up the04:57demand and keep the pace going in terms04:59of how hot the housing market is the05:00other way that i can potentially see05:02this going is that it’s going to have a05:03complete lopsided changes when it comes05:05to the underwriting system so we may05:07basically see a wash between the people05:09who can’t qualify and people who used to05:11qualify not being able to qualify05:12anymore so now we may see a complete 18005:15degree change so when it comes to credit05:17scores they are important but it is05:19becoming less and less relevant when it05:22comes to lenders looking at borrowers05:24wanting to apply for mortgages auto05:25loans car loans credit loans the whole05:27nine yards so in the future if you’re05:29looking to apply for a credit card for05:30auto loan for a mortgage do know that05:33banks are starting to shift and change05:35not from just credit scores but also now05:37looking at other factors as well now05:39earlier in this video i ordered the05:40words social credit and this might bring05:43chills down to your spine or may give05:44you goosebumps that’s because in china05:47they are using a some form of a social05:49credit whereby your choices your05:51behavior your social status your job who05:53you hang out with can determine whether05:56you are qualified for certain financial05:58products or you don’t qualify and that’s06:00not all in some parts of china social06:03credit is being also used to deny entry06:05to certain services they may use social06:07credit profile to allow you to vote or06:10not allow you to vote and it’s got a big06:12big major factor in pretty much how you06:14live your life now here in the united06:15states thankfully we do have laws and06:17regulations that prevent things like06:19social credit from happening but there06:22is a bank that is starting to use06:23something like a social credit system to06:26determine your future ability to borrow06:27money now there is a bank here in the06:29united states that offer a very specific06:31type of a loan that looks at what06:34products you’re looking to buy now i06:36know you’re saying well that’s pretty06:37much everything right mortgages car06:38loans i mean they want you to use a06:40mortgage to buy a home but consider this06:42there is a bank that offers what’s known06:44as a buy now and pay later loans and you06:46may have seen those in certain you know06:47shopping sites that are out there well06:49this bank is wanting to see what06:51products you’re buying to determine06:52whether you qualify for that loan or not06:54so for example a fitness equipment if06:57the bank knows that you’re borrowing06:58money to buy a fitness equipment they07:00see that as a positive step to07:02increasing your health and your your07:04quality of life and therefore the banks07:06are more likely to approve that loan07:09versus if you went out and said you know07:10i’m gonna borrow money to buy the latest07:13video game console this bank just may07:15deny your loan purely based on what07:18you’re buying and they think that you07:20might get addicted and they may07:21determine that buying a new video game07:23console might be a bad direction to your07:26life’s quality so while this may not be07:28a full-blown social credit system it is07:30a step towards really debates07:32determining how we live and what choices07:34we make and the freedom that we get to07:36choose whether we want to buy video game07:38consoles or a fitness machine or fitness07:40workout machine so i don’t know what you07:42guys think about that go and leave your07:43comments down below is that step towards07:45what could be a social credit system or07:48is that smart is that something that the07:49banks should start to use i don’t know07:51tell me what you guys feel and think07:52down below in fact what i’ll do is as07:54soon as this video is published i’ll07:55spend the next hour replying commenting07:58and having a conversation with you guys07:59so that’s it guys for this video there’s08:01a lot of changes coming to the credit08:02scoring model and how borrowers are08:04being assessed for risk so if there are08:06other changes coming down the road08:07definitely subscribe because i’ll tell08:09you guys exactly what those changes are08:10that being said thank you so much for08:12watching and i’ll see you in the next08:13video English (auto-generated)