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New Credit Scoring Models – Lenders are Using More Than Just Your FICO Score

Beyond the FICO credit score, banks and credit card issuers are digging deeper into people’s lives and using powerful new tools to see where you live, how often you switch jobs or telephone lines, or whether or not you get paid with direct deposit to decide whether you deserve a loan or a credit card. These new credit scoring models are being developed and used by lenders to look at more of a person’s credit and employment history than simply pulling up their FICO score.

Because of the new federal regulations which went into effect July of 2011, a lender will have to disclose why they are denying someone credit or charging a person a higher interest rate. But, the underlying data and formulas used to determine a person’s credit worthiness will still remain a mystery to the average consumer.
Deposit Behavior Score

One of these new credit scores is called the “Deposit Behavior Score”. This tracks how people manage their money by reviewing their checking and savings accounts. The actual formula is not know, but it has been determined frequent overdrafts will drag this score down. Also, people who do not have their payroll checks direct deposited or if their account goes from $3,000 to $100 every month, their scores will be lowered accordingly.
Job Security Score

ScoreLogix has been marketing a “Job Security Score” to lenders since 2008. This score attempts to gauge a person’s credit worthiness based on income stability. Your score is based on hundreds of economic variables – right down to employment and income levels in specific ZIP codes.
Credit Optics Plus

TransUnion unveiled a new score called “Credit Optics Plus” last summer. This score attempts to predict risk by tracking “stability” factors such as changes of address, telephone lines and other personal data. The score may benefit young people or recent immigrants who may have stable incomes and employment but thin credit histories, while possibly penalizing people who move a lot because of their jobs. Lenders are still testing the score.
Other Scoring Models

It is estimated there are more than 100 credit scoring models in circulation – most with unknown names and algorithms. With 25 percent of U.S. consumers with a FICO score of 599 or less, lenders are trying to find new ways to measure risk or simply put – determine a persons credit worthiness. Digging deeper and deeper into our lives and factoring in more than just our credit history, is what lenders are doing now to evaluate whether or not your will get that car or home loan.

So what can you do to make sure you are not denied that loan? Pay your bills on time and monitor the information on your credit report to make sure it is accurate. Eventhough there are a lot of new credit scoring models floating around, banks and lenders still use the information on your credit report as the basis of their decisions. If your report is solid, the other infractions may not seem so bad.

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Affiliates For Credit Repair Service? Think Again!!!

Let me start by saying that we believe in affiliate marketing in many regards. However there are some specific issues affecting the credit service industry that you as a consultant must consider.

Law Firms are in general exempted from the Credit Repair Organization Act especially regarding the bond needed. They are bound by their state bar association and state laws. You never see the FTC closing down Law Firms for credit repair violations. We normally see non law firms getting the boot for issues under the CROA.

Therefore, when you see these law firms offering affiliate programs, it is really a great bet for them. If you are a non law firm the story MAY BE different.

Many of the companies in trouble are  now reported by more fellow credit repair companies and affiliates than consumers. Yes, you read it right!!!!! The business side is reporting these violations not the average Joe seeking credit repair since most companies are trying to do their best to assist their clients. Yes there are exceptions but it is the truth. I guess they are weeding out the competition.

Why? If you are dealing with affiliates who are not tied to the industry in some form e.g. Dealers or brokers, you may be inviting problems to your company. Most of the problems and disputes we have seen are regarding refunds and affiliates making claims on their website that are not in compliance. Companies holding back on funds because of consumers seeking refunds and disputes have escalated to companies being reported for charging up front fees and compliance issues. You can’t control your affiliates and their methods of gaining customers for your business.

Most companies promoting this method are primarily doing so as a marketing agenda for their software or company. Yes, of course they will promote the use of affiliates to grow your business. It is a feature of their software and grows their business. We do not have an issue with this but just want you to understand the bright and dark side of implementing this avenue.

You can charge a fee for a direct service all day long and firms have found creative ways to work around the upfront fees issues. However, why invite trouble? Yes, you may grow faster but at what cost?

We at CCA believes that the best way to grow your business is to become an expert, do workshops, radio shows, and seek referrals via relationships e.g. brokers, churches, organization and seeking credit challenged individuals from your local dealers, real estate and banks….Yes, there are others ways using the Internet.

Just don’t buy into all the success of others who are using affiliate marketing. It could be short lived and you may be invited unwanted officials around your firm.