Changing credit scoring system
In December, we reported on a move that will soon change credit scoring as we know it. With their partnership with FICO, CoreLogic will fill in the credit holes that traditional scores ignore. The supplemental score will highlight data like evictions, applications for payday loans, child support judgments, property tax liens, the status of homeowner’s association dues, whether or not you are underwater on your house or own other properties that credit agencies miss, and are debating whether or not to include utility bills or cellphone bill payment histories.
To dig deeper on the CoreScore, AGBeat asked CoreLogic four questions to expand on the topic, featured below.
What does the CoreScore include?
What data does CoreLogic have that is not currently part of the new credit scoring but could be in the future (ex: cell phone payment records)?
Currently, the CoreScore™ credit report does not include utilities payment transactions or cell phone payment records. Our focus in our next release is to use the information provided in the CoreScore credit report to calculate credit scores that reflect traditional bureau information as well as this newly available information. In the future, CoreLogic intends to remain focused on collecting credit information that is not readily available on traditional credit reports, to provide increased visibility of consumer credit behavior. We believe that this transparency will lead to reduced delinquency rates for lenders because lenders can make sounder lending decisions and that it will lead to expanded credit offerings for consumers due to greater comfort and lower loss rates of lenders.
Impact on borrowers
How will this positively and negatively impact borrowers?
Just like the factors considered for traditional credit reports and scores, CoreScore will reflect a particular individual’s credit capacity and payment behavior. The score itself will not be available until late March, so it is difficult for us to gauge exactly what kind of an impact it will have before we’ve seen it in the marketplace. However, we can say that for some borrowers it could have a very positive impact, for some it could make no difference in their current ability to qualify for a loan and for others, potentially lower their scores.
“The CoreScore credit report is a valuable tool for consumers and lenders alike,” said Tim Grace, senior vice president of CoreLogic. “By seeing the additional data lenders can now use to make credit decisions, consumers themselves can gain a more clear understanding of their own credit behavior and, as a result, this could help them identify steps they can take towards building a more positive credit profile.”
The CoreScore credit report can be particularly helpful to consumers that have minimal credit transactions on the traditional credit reports. For example, a borrower who has a loan in good standing with a company that doesn’t report to the national credit reporting agencies could be identified as a qualified applicant through the CoreScore credit report, revealing an otherwise unseen credit history.
Consumers will be able to see all of the information CoreLogic provides to lenders and have the right to dispute any data on their consumer file. CoreLogic Credco will facilitate the reinvestigation of each item and perform all Fair Credit Reporting Act (FCRA) responsibilities in the resolution of disputes, correcting the data as needed. In addition, CoreLogic allows consumers to submit a statement of explanation regarding anything on their report, such as a legitimate issue with a landlord’s services.
How long has the new credit scoring been in process and what was the inspiration behind this product?
CoreScore has been in development since early 2011. The CoreScore credit report was made available November 30, 2011, while the score itself is in development with our partner, FICO®, and scheduled for release in late March.
Eighteen months ago, when CoreLogic was formed we told the market our new company would leverage our data assets and analytical capability to deliver new products to the market. The CoreScore solution is an example of the company’s vision.
What is CoreLogic’s anticipation of the new credit score going mainstream?
While we cannot predict whether CoreScore will become “mainstream,” we can say that this is only the beginning. Our current plan is for the CoreScore solution to supplement existing credit reports and scores. We want to ensure that we’re providing a product that can help consumers gain a better understanding of their finances and help lenders’ better assess an individuals’ credit worthiness. We believe that if lenders are able to make safer lending decisions, it will help unlock additional credit opportunities for consumers.”