Lenders’ data mining goes deep

Mortgage makers are going beyond tax returns and bank statements to determine whether you’re a good risk. They’re checking such things as where you have pizza delivered and where you shop online.

By DinSFLA

What does Car Insurance and Credit Scores have in common? DISCRIMINATION!

If the government does not step up with a plan to make sure this does not continue, other crisis will begin to brew.

AMERICA will take the roads uninsured because they cannot afford the rates and they still need to get to work and shop for food!

Once our survival instincts kick in nothing else matters but food, clothes and shelter. Get my point?

So this being said and with the high rate of foreclosures out there. Who is going to have stellar credit for car insurance?

The same goes with Employers and Home Insurance!

Enough is Enough…We are suppose to be the Land of The Free not The Controlled and Abused!

THIS NEEDS TO BE EVALUATED IMMEDIATELY! THIS AFFECTS EVERYONE!

Arkansas and Oregon Lead the Way

The attorneys general of Arkansas and Oregon have both filed suits against a leading car insurance company for failing to disclose “adverse actions” taken against customers based on their credit. Five other states have joined them in seeking national clarification on the matter. But this begs the question, “Why would car insurance companies not tell you that your credit was impacting your rates?”

The answer is simple: Every car insurance company treats its customers’ credit differently. A study by Consumer Reports showed a nearly forty percent difference between how two car insurance companies viewed the same bad-credit customer. And that’s two car insurance companies that actually use credit reports – some don’t. In that case, you could save up to forty-seven percent on your car insurance rates!

DinSFLA here: Before you read into this *new* PR move and get all wound up…you MUST read the post I made FAIR ISAAC CORPORATION aka FICO: Now Worthless…

These banks knew all to well where we were heading and they could have stopped this a long time ago!

Don’t fall into their credit trap to make you think you are worth a stupid number! Just know how to survive and work around it. Yes places like employers and insurance companies now rate you by this but you know what? It is what it is. Your health and your mind will not suffer from this… They want you to live, breathe their credit!

More Americans’ credit scores sink to new lows

By EILEEN AJ CONNELLY (AP) –

NEW YORK — The credit scores of millions more Americans are sinking to new lows.

Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.

Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.

“I don’t get paid for loan applications, I get paid for closings,” said Ritch Workman, a Melbourne, Fla., mortgage broker. “I have plenty of business, but I’m struggling to stay open.”

FICO’s latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO’s 300-to-850 scale weren’t as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.

More are likely to join their ranks. It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual’s score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.

On the positive side, the number of consumers who have a top score of 800 or above has increased in recent years. At least in part, this reflects that more individuals have cut spending and paid down debt in response to the recession. Their ranks now stand at 17.9 percent, which is notably above the historical average of 13 percent, though down from 18.7 percent in April 2008 before the market meltdown.

There’s also been a notable shift in the important range of people with moderate credit, those with scores between 650 and 699. The new data shows that this group comprised 11.9 percent of scores. This is down only marginally from 12 percent in 2008, but reflects a drop of roughly 5.3 million people from its historical average of 15 percent.

This group is significant because it may feel the effects of lenders’ tighter credit standards the most, said FICO’s Jennings. Consumers on the lowest end of the scale are less likely to try to borrow. However, people with mid-range scores that had been eligible for credit before the meltdown are looking to buy homes or cars but finding it hard to qualify for affordable loans.

Workman has seen this firsthand.

A customer with a score of 679 recently walked away from buying a house because he could not get the best interest rate on a $100,000 mortgage. Had his score been 680, the rate he was offered would have been a half-percent lower. The difference was only about $31 per month, but over a 30-year mortgage would have added up to more than $11,000.

“There was nothing derogatory on his credit report,” Workman said of the customer. He had, however, recently gotten an auto loan, which likely lowered his score.

Studies have shown FICO scores are generally reliable predictions of consumer payment behavior, but Workman’s experience points to one drawback of credit scoring: lenders can’t differentiate between two people with the same score. Another consumer might have a 679 score because of several late payments, which could indicate he or she is a bigger repayment risk.

On a broader scale, some of the spike in foreclosures came about because homeowners were financially irresponsible, while others lost their jobs and could no longer pay their mortgages. Yet both reasons for foreclosures have the same impact on a borrower’s FICO score.

In the past too much credit was handed out based on scores alone, without considering how much debt consumers could pay back, said Edmund Tribue, a senior vice president in the credit risk practice at MasterCard Advisors. Now the ability to repay the debt is a critical part of the lending decision.

Workman still thinks credit scores alone play too big a role. “The pendulum has swung too far,” he said. “We absolutely swung way too far in the liberal lending, but did we have to swing so far back the other way?”

Copyright © 2010 The Associated Press. All rights reserved.