Mika Abigail LLC founder of Finah Expert MicAh Smith talks to Fox News digital news about the most important difference between Fico 10t and Vantagescore 4.0.
New credit scoring models covering the mortgage industry could significantly increase the number of Americans getting credit scores — but experts warn that lenders shouldn’t get confused by the number on the loan paper.
As credit repair expert Mikah Smith put it, “people with small credit files … may be able to see a score … but that doesn’t mean loan approval.”
“Actually it is shown that about 33 million people will have points with these new models, it is not allowed,” it was clarified.
A few months ago, the Vantagescore 4.0 model entered the market of fixed assets, competing directly with the FICO 10T. Algorithms represent two renewable credit formulas approved for future property loan applications, each designed to paint a more detailed picture of a borrower’s financial habits.
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FICO 10t includes information about “captured data,” which means it looks back over time to see how consumers are managing on balances and payments rather than capturing just one report on a credit report. Vantagescore 4.0, meanwhile, expands the types of information that can be used to calculate scores — which is why it’s expected to generate scores for millions of Americans who have little or no credit files.
High credit scores don’t mean a loan is approved, credit expert Mika Smith explains to Fox News Digital. (Pet Pictures)
While both models implement the system in different ways, sellers – not ultimately buyers – will decide which algorithm they trust when analyzing the loan program.
“You’re never going to have the ability to choose between the two. So it’s going to be a lender’s view of what algorithm they’re actually using,” Smith said. “And so the biggest thing that we want people to focus on is … just stick to the basics and focus on what has always, in the past, built a good credit score.”
If a person’s score drops below the new algorithm, Smith offers a three-triges plan, including daily habits that can improve credit for more than six months to a year.
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“Three tips you can easily use to make sure your scores jump to higher tiers: one, we want to study the credit report and look for mistakes,” he advises. “Carrying balances on credit cards always moves the needle… [and] What we would ask people not to do is to make a rash and irrational decision. Don’t chase trends, don’t look for gimmicks. “
Smith pointed out that fellow industry experts have expressed concern about the possibility of a shift toward a “softer” vantagescore that could “cause a recession like the one that fueled the recession.”
“Guardrails are in place now because we learned in 2008, 2009. And of course, what we’re seeing is that lenders are very strict about their terms.
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“When they issued these loans without documents, without doing a complete study, they sold these loans to Wall Street.
“Now, lenders are more vigilant and do their due diligence to make sure someone can repay the loan.
As of Wednesday, mortgage rates are nearing 6% lows, as Zillow reports a 30-year fixed rate at 6.04% and a 15-year adjusted home loan rate.
Smith warned consumers of the biggest mistake they make when they hear a new scoring model is coming, emphasizing the risk of “jumping ahead” without understanding the details.
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Mikah Abigail LLC founder of @fitcreditdoctor Mikah Smith talks to fox news digital news about why she opposes the implementation of the 50-year withholding amount.
“I think the biggest thing that I want people to understand when it comes to these new types of scoring is to pay attention to the narrative and how you throw it,” he said. “It doesn’t matter how you make a flat pancake, it’s always how compact it is. And so don’t blame the scoring model, let’s face it, it’s possible Credit has a working score and there are people helping you get there.”
“If you get points then, when you start building good habits, no matter how the algorithm pulls the algorithms in all the algoriths. You have gone down in any kind of your programs. You sign your name on the dotted line, make sure you know the risks.”
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