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 views
Aug 19, 2021
MAJOR 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
00:00
for many years the fico score has been a
00:01
dominating factor when it comes to
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borrowers applying for a new mortgage
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credit cards and even auto loans but
00:07
changes are coming and big lenders are
00:09
moving away from using the fico scores
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but instead relying on their own data
00:13
and metrics to determine the risk of a
00:15
potential borrower even fannie mae and
00:17
freddie mac the government-backed
00:18
agencies are starting to consider using
00:20
other types of data and other scores
00:22
when it comes to securitizing mortgages
00:25
so in this video we’re going to dive
00:26
into how this will impact the housing
00:27
market how this will change your ability
00:30
to borrow money in the future and what
00:32
could be the start of a social credit
00:34
system
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[Music]
00:40
so fico scores range from 300 to 850 300
00:44
being really really bad and 850 being i
00:46
mean pretty much perfect and the highest
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credit score i’ve ever seen was 835 so
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i’ve never met a person with the perfect
00:52
850 fico score the way that fico scores
00:55
are primarily calculated are first of
00:57
all your payment history how well you
00:58
pay your loans on time second being your
01:01
credit utilization this is how much of a
01:03
revolving credit you use and how much
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credit you use in general number three
01:07
is your credit file age meaning how old
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is your credit the longer you have your
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credit file and information in your
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credit report the better as it gives
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more predictability and data for banks
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to go ahead and assess your risk number
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four is your credit mix so how diverse
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your different credit counts are do you
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have auto loans mortgage student loans
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credit cards the more diversity in your
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credit file the better and last but not
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least number five is new credit
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essentially how many of your credit
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cards and accounts are essentially new
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fico scores have been a gold standard
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for many many years for base success
01:40
whether a borrower has the ability to
01:42
pay back their loans but just like what
01:44
i mentioned earlier banks are moving
01:45
away from using fico scores in general
01:48
you see fico scores have been dominant
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for a very specific reason and that is
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because fannie mae and freddie mac has
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been dictating that fico scores have to
01:55
be used when lenders are using a credit
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score to determine and underwrite a
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borrower when it comes to getting their
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mortgages well for many banks and many
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lenders they pretty much said you know
02:06
what if it works for mortgages it must
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work for credit cards and auto loans or
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because mortgages being a really high
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ticket loan they pretty much thought
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well it’s got to be the riskiest
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therefore it could work for other credit
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loans as well according to a recent wall
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street journal article fannie mae and
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freddie mac are now considering using
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other type of scores such as vantage
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score which is a rival score to a fico
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score when it comes to underwriting for
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mortgages you see something i haven’t
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mentioned is that there are different
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types of fico scores there’s fico 2 3
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and five five seven fico eight and a new
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fico nine there’s vantage 3.0 score
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national equivalency score there are
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thousands and thousands of different
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credit scores are out there but it just
02:45
happens to be that fico score has been
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the golden boy because fannie mae and
02:49
freddie mac set so added with the fact
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that millions and millions of homeowners
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and borrowers have gone through mortgage
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forbearance programs and loan deferments
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program due to care’s act last year it
02:59
has completely thrown off the accuracy
03:02
and how data has been stored when it
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comes to credit because the cares act
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has allowed millions of homeowners and
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borrowers to get into a variance
03:09
programs without any negative
03:11
consequences to their credit so
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obviously the banks are saying well that
03:14
doesn’t really help our situation when
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it comes to assessing risk so that has
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ultimately resulted in banks looking in
03:20
other directions and other data which
03:21
we’re now starting to see individuals
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with really low fico scores even getting
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approved for mortgages and loans even
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big lenders like synchrony financial
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which they’re mostly responsible for
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store cards are now moving away from
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fico and has completely switched to
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vantage 3.0 so what exactly are banks
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looking at if they’re not looking at
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credit scores well banks are starting to
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look at deposit histories how often you
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go into overdraft and they’re looking to
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see what other financial credit and
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products are using when it comes to
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determining the credit worthiness and
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risk of the borrowers this could also
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lead into banks wanting to look at what
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kind of job you have they may want to
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see how much money you got stored up in
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your checking account or your savings
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account and how large your deposits are
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and how often those deposits are when it
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comes to pretty much determining the
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risk as a borrower so i’m going to
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change up the gear a little bit and talk
04:08
about how this will impact the housing
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market and the real estate market in
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general so first of all this could be a
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really great news for individuals with
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great income history deposit history
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they rarely get into overdrafts maybe
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have they have really good jobs but they
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may not have a good credit history so
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that’s a good news for them as banks are
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increasingly looking at other data and
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they might not look at credit history as
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much so these individuals may get
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approved to go and buy a home therefore
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we may see an increase of demand and
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also more purchases down the road but on
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the flip side this change can exclude
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individuals with great credit but they
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may suffer in terms of deposit histories
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income and other factors outside of
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credit to me i see this going in one or
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the other way the first being is that
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we’re going to see a lot of borrowers
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with bad credit getting approved for
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mortgages which would drive up the
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demand and keep the pace going in terms
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of how hot the housing market is the
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other way that i can potentially see
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this going is that it’s going to have a
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complete lopsided changes when it comes
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to the underwriting system so we may
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basically see a wash between the people
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who can’t qualify and people who used to
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qualify not being able to qualify
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anymore so now we may see a complete 180
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degree change so when it comes to credit
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scores they are important but it is
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becoming less and less relevant when it
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comes to lenders looking at borrowers
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wanting to apply for mortgages auto
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loans car loans credit loans the whole
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nine yards so in the future if you’re
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looking to apply for a credit card for
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auto loan for a mortgage do know that
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banks are starting to shift and change
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not from just credit scores but also now
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looking at other factors as well now
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earlier in this video i ordered the
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words social credit and this might bring
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chills down to your spine or may give
05:44
you goosebumps that’s because in china
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they are using a some form of a social
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credit whereby your choices your
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behavior your social status your job who
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you hang out with can determine whether
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you are qualified for certain financial
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products or you don’t qualify and that’s
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not all in some parts of china social
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credit is being also used to deny entry
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to certain services they may use social
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credit profile to allow you to vote or
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not allow you to vote and it’s got a big
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big major factor in pretty much how you
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live your life now here in the united
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states thankfully we do have laws and
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regulations that prevent things like
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social credit from happening but there
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is a bank that is starting to use
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something like a social credit system to
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determine your future ability to borrow
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money now there is a bank here in the
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united states that offer a very specific
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type of a loan that looks at what
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products you’re looking to buy now i
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know you’re saying well that’s pretty
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much everything right mortgages car
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loans i mean they want you to use a
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mortgage to buy a home but consider this
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there is a bank that offers what’s known
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as a buy now and pay later loans and you
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may have seen those in certain you know
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shopping sites that are out there well
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this bank is wanting to see what
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products you’re buying to determine
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whether you qualify for that loan or not
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so for example a fitness equipment if
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the bank knows that you’re borrowing
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money to buy a fitness equipment they
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see that as a positive step to
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increasing your health and your your
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quality of life and therefore the banks
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are more likely to approve that loan
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versus if you went out and said you know
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i’m gonna borrow money to buy the latest
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video game console this bank just may
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deny your loan purely based on what
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you’re buying and they think that you
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might get addicted and they may
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determine that buying a new video game
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console might be a bad direction to your
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life’s quality so while this may not be
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a full-blown social credit system it is
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a step towards really debates
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determining how we live and what choices
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we make and the freedom that we get to
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choose whether we want to buy video game
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consoles or a fitness machine or fitness
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workout machine so i don’t know what you
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guys think about that go and leave your
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comments down below is that step towards
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what could be a social credit system or
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is that smart is that something that the
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banks should start to use i don’t know
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tell me what you guys feel and think
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down below in fact what i’ll do is as
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soon as this video is published i’ll
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spend the next hour replying commenting
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and having a conversation with you guys
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so that’s it guys for this video there’s
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a lot of changes coming to the credit
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scoring model and how borrowers are
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being assessed for risk so if there are
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other changes coming down the road
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definitely subscribe because i’ll tell
08:09
you guys exactly what those changes are
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that being said thank you so much for
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watching and i’ll see you in the next
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video
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