AYF 47 | FICO Score

 

Your FICO score might just be one of the most important elements of your credit application. Because so many lenders use the FICO system, it might be best for you to get acquainted in the ways you can help the system see you as a better applicant. Merrill Chandler is joined by Jessica Tabora, a business manager at CreditSense. Merrill and Jessica run through the ways FICO matters in your credit application and how you can keep up the appearance of a stronger credit applicant. After all, you want to succeed as much as the FICO system wants you to succeed.

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Why FICO Matters With Jessica Tabora

If You Think It’s Just Score…You’re Wrong

I’m going to tell you a couple of things about what FICO means to you and why FICO matters. I’m here with Jessica Guisinger Tabora. I got excited about this. I trampled over a couple of team members earlier in my enthusiasm and excitement.

I was the team member he is talking about.

Why FICO? Why does FICO matter? What is it about FICO that changes your fundability? What do we need to do to make sure? I need you to understand because we refer to it all the time. Let’s get started. First of all, Jessica, tell us about the FICO score. What percentage of FICO lender decisions are done by FICO versus every other scoring platform out there?

FAKO versus FICO? All decisioning is done by FICO. Merrill has talked about it before. If you have a Credit Karma, if you use them, then those are FAKO scores. Everyone is using FICO decisioning.

By everyone, we mean 90%-plus across the United States. FICO is even going into world dynamics. There are 60 countries represented here at this FICO, 60 countries that are implementing FICO technology.

We’re getting into a few different percentages here. Let’s keep these straight. First of all, 90% of all financial approvals come from the FICO score. Another one that we’re going to be talking about and that you’ve known Merrill talked about it is that 80% of approvals are from your personal profile. Since we are going to be saying several different percentages, I want to make sure we’re all straight on these. 90% of all approvals are from FICO.

All approvals across the board for all consumer decisioning and business decisioning, business approvals come 80% from the personal side. This is why we are saying that FICO matters and we’ll continue to go. It’s the leader in lender fraud detection. They have an entire thing called FICO Falcon Fraud Detection. Tell us about your class.

FICO is the leader in fraud detection and fraud prevention as well. This whole conference is about AI and everything, all their products, everything they’re pushing towards is about fraud detection and prevention. There are lots of exciting things that we’ll talk about.

One of the groups that we went to and spoke with is the application fraud manager. They have a software outfit. The group was introduced to us by our solutions ambassador, Dennis. We have a solutions ambassador assigned to us to make sure that every single one of our questions gets answered.

He’s great. He comes up and talks with us. He walks us to the different booths we need to talk to.

They are top drawer. What’s up with FICO? They’re so nice.

Every single person here at FICO or associated with FICO is the nicest person in the whole world. They’re like, “How are you doing?” They’re genuinely wanting to know how your day is going, what you’re interested in, what business you’re in, how they can help you, giving all the information they need.

Shout-out to FICO. #FICOClientRelationsRules.

It makes me want to be a better person.

I was in a class, the executive experience for CEOs. They had a private lunch and I go into the private lunch and the whole table was empty. I’m the first one seated at the table. The vice president of Analytics comes and sits down next to me and introduced himself. We just start chatting up and then he points out all the other VPs of who we need to talk to, who then I take to our ambassador and say, “By the way, Alan said we need to talk to Tony.”

90% of all loan approvals come from the FICO score. Click To Tweet

The dominoes just fall. They welcome you with open arms. They’re not trying to hide anything, which we talk about a lot is that there’s that adversarial relationship. They don’t want it to be that way. That’s why we’re here, obviously. We’re building those relationships, getting information from them to share with you because they don’t hold anything back that they don’t have to.

There’s always that IP line said where they’re like, “Intellectual property.” We say, “Up to the intellectual property line, answer me this.” They lean in.

They go right up to the line saying everything they can. I have loved every interaction we’ve had here.

Why FICO? Because they want borrowers to be successful. The whole reason why in 2016, at that FICO, we met with the CEO. I’ve told this story a dozen times. We’ve met with Will Lansing, the CEO, who did a massive presentation. That was brilliant about the future of FICO’s direction. He loved our business model. We’re here with positive thumbs up from people where they want to improve the borrower education. An educated borrower is going to be a savvy borrower, a successful borrower. We heard the vice president of Scoring. We were in the auditorium when she was rehearsing her presentation. She’s literally saying they did a massive study. It was a full-blown scientific study of the tendency. Because some lenders, when they were onboarding the credit scores, the lenders were afraid that if people know about the credit score, then it’s going to skew the credit score. It’s going to harm or the score is going to become worthless.

This was back in the ‘90s. If that were true, everyone would have an 850 credit score fundable profile.

The whole point she was making was that borrower awareness can inspire borrowers to be more fundable. The payback, the defaults go down. The more you know about what you’re doing, the more you care about what you’re doing. Once again, why FICO? Because FICO wants borrowers to be empowered and inspired to be fundable. Because FICO’s clients are lenders, not you, the borrower. They want an intelligent, competent and amazing group of borrowers to send to their lenders. Hence the reason why our invitation and why we get access every year. Talk about what we were talking about with David and lender strategies that FICO builds that sometimes lenders like.

It makes sense after we talk about it, but we’ve talked to David and Tom both about it, the FICO scoring models. A common answer that we’ve gotten so far has been it varies from lender to lender. That’s true. I thought they were dodging our questions at first, but then we would talk to David and we got into the specifics of it. He explained it and he said, “That’s the legitimate answer.” It’s because some lenders don’t take into account your FICO score or they’ll do double-dipping. They’ll have their own custom models that include your FICO score and then they compare that against your actual FICO score.

We learned some great matrix things where they compare their score with FICOs algorithm and then where that lands on the matrix, that’s their fundability.

It makes sense because if everyone was looking at the same information, that would be so much easier for us to do our jobs and to help you. That solidifies our point in what we teach you about vetting lenders, making those business banking relationships, personal banking relationships. Don’t be afraid to have a conversation saying, “What am I to expect from your bank? What is your underwriting looking for? What is important to you?” That relationship is such a two-way street. You can expect the bank to give you the lowest interest rates and all of these extra things and lower annual fees, but then not be interested in what they’re looking for and what they want.

David even said that there are some lenders who ignore the FICO modeling data and will say, “Anybody below 680, we toss them out.” Even though FICO’s modeling says, “These guys 80% of the time are going to be good or non-risky borrowers.”

One concept that he kept going back to, one of the biggest things is your current and previous relationships. It’s such an important thing.

By the way, when we talk about Tom, he’s new to our universe. Tom Quinn, he’s the Vice President of Scoring and was referred by Ethan who we’ve talked about over and over. Ethan referred him to his counterpart.

We were leaving breakfast and I was checking my phone, going through emails and texts and I was like, “Merrill, have you looked at your emails?” He’s like, “No. What?” We got this email, “The vice president of Scoring is going to join you.” We both have the biggest happy dance. We’re like, “What did we do to get this?” We’re seriously like kids in a candy shop here. It’s so great.

Because we get to geek out so you don’t have to. We go back to the question, why FICO? It’s because FICO is used by the lenders. FICO trains lender underwriting software and gives the lender components the underwriting criteria. They deliver lenders their underwriting criteria and where they have their own, which are called lender strategies versus score modeling, which is a new language for me. It’s a new thing I got to learn. Lender strategy may be different in some cases than the actual FICO modeling. It’s dynamic.

That’s okay. That’s what we want because that’s not always a disadvantage to you. In some places with certain profiles, that might work to your advantage if you have a relationship with a bank and they’re looking for a relationship with a bank, but you don’t have as strong of a credit profile.

AYF 47 | FICO Score

FICO Score: FICO is an industry leader in fraud detection and prevention.

 

That could be a significant positive because banking relationships matter even if they’re pure FICO, score-driven and the FICO-40 driven. When I say score, please remember I’m not talking about the three-digit number, I’m talking about the 40 characteristics that are being measured over the 24-month lookback period, as we always talk about. We got to build those relationships.

I’ve told the story at the bootcamp before, but for those of you who haven’t attended our bootcamp or if you haven’t been there, I built a banking relationship with a banker in Salt Lake City and we became such good friends. We started sending each other pictures of our dogs back and forth on Snapchat and then we started going out for lunch. I built that banking relationship and anytime I had a problem or something come up, she knew how to handle it exactly. She made time for me. She didn’t get frustrated at any of my problems because we had that relationship. It wasn’t just another banking customer coming in causing problems for her. She wanted to see us succeed and wanted to see me succeed. She was invested in me and I am grateful for that relationship. I’m close to her and I can ask her anything and not feel like I’m going to get a vague answer. She’s going to answer me.

She goes in and gets the data and sees what happened in the account. We once had a debit fraud. Some people got hold of our numbers. She helped her clean up everything. It’s a totally top-notch service.

That story has nothing to do with getting approvals at that time or getting approved for anything. I have full confidence if I needed to go in at any time to approve or apply for a line of credit, a credit card, anything she would work with me and make it happen because we’re at that level.

You have great credit.

That helps too.

Why FICO? Because first of all, it dominates the scoring, modeling and fraud-prevention marketplaces. When you know the rules of the game, you can win the game. That’s what we’ve talked about from the very beginning. We are at Mount Olympus of the credit gods.

They are not hiding anything. Trust me. There’s no expense spared here. They are three levels of classrooms and meeting spaces, just wanting to share.

It’s amazing. Everybody but us are bankers, underwriters, insurance companies or other people who are using underwriting criteria and their modeling software. FICO is meaningful to you. Knowing why we come to FICO and knowing this isn’t just us geeking out, you can have confidence that we are working with the dominant force in scoring and approvals. I’ve ragged on the scoring. I don’t care what your score is, but let’s give a little context to that. I say I don’t care what your score is. I care whether or not you’re fundable. That is true. Now that we’re talking about scoring, if your score is built on a fundable profile, your score drives your rates and your terms. That’s lender by lender, but in many cases, your score drives the loan amount. The approval is the lender criteria, that matrix that they use with FICO. Knowing the rules of this game, knowing the FICO 40 allows you to play it, win it and master it.

We’re going to teach you the rules of the game.

We’re sitting at the feet of the credit gods and they’re helping us understand how to help borrowers, the borrower efficacy, borrower intelligence, borrower capacity and education. They’re helping us help you.

Before we get into the next topic of conversation, I want to say that I love taking analogies and metaphors as far as I can take them. If we’re going to teach you how to play a game, we’re sitting at the feet of the other team reading their playbook, as far as I can take a joke or anything. I’ve got two good ones.

They’re helping us review all the playbooks.

We’re at the pros right now playing. I feel like a middle-schooler.

I’d say at least high school.

FICO dominates the scoring and modeling marketplaces. Click To Tweet

We’re working really hard.

It could even be college. On SPSS, we’re college-level ball. We’re killing it. We are creating a dynamic that you can trust where we may be a few or dozens or hundreds of steps ahead of what you know, but you can count on us, the CreditSense team, myself to always be pushing forward and learning more.

We don’t hold anything back from you. They don’t hold anything back from us.

FICO has been generous and we want to make sure that you know everything we can possibly put into our software, our educations, our bootcamps. The book, go to GetFundable.com. Click on the book, you’re going to see a ton of this. Another reason why FICO is because FICO is visionary. I spoke about the CEO, Will Lansing. He’s a very humble guy. He’s easy to approach and easy to talk to. He’ll talk shop with us and he has in the past. One of the things that vision includes is what we call the FICO 150. We met with Tom Quinn and talked about this because we barely learned about the 150 and FICO. We call the FICO 40 because between the three bureaus, one uses 39, one uses 42, but of the 150, plus or minus, 40 are used as part of their scoring for across the bureaus. There are 150 reason codes are what are called statuses.

We talked to Tom about this and before you get into it, it’s not just in this experience, but FICO is constantly looking forward. It’s another reason why FICO. They’re not waiting for something, recession or anything crazy to happen before they react to it. They’re thinking right now what’s going to happen in 5, 10 years and how their system can accommodate for them. They’re also taking that and you learn from history, looking back 5, 10 years.

The recession, we’re going to get to it. What they’re doing, they haven’t even alpha-tested a new score that we’re going to tell you about. They’re looking back at the last recession and seeing how they can help borrowers and banks.

They know what’s going on.

That FICO 150, we found out that some of them are from previous versions of the software and some of them are for future versions of the software. There are 150 reason codes and I am going to be doing a deep dive. I don’t have time to do it here, but I am going to be doing a deep dive. We are dissecting those 150 in one of our conversations so that we can show you the global areas in which they’re measuring and it’s totally fascinating. You said it perfectly. They are always casting forward to make it more predictive. The more predictive their technology is, the more we align our behaviors around it, the more fundable we are. That’s the whole thing, get fundable. The last thing I wanted to share, I was in the executive experience and the Senior Vice President of Scores and Analytics, her name is Sally Taylor. We got a preview of her presentation and she did an amazing presentation and introduced to executives what’s called the FICO Score Stress Indicator, FSSI.

This financial stress indicator, it would say which 680s are going to make it through the next recession. They have been able to profile which behaviors, which of the reason codes, even if you have a 680. We don’t want you to have a 680. If you’re working with us, we’re mid to high 700, 800 based on your quality profile. She was saying that there are some 680s who fell out and went default. There were other 680s who didn’t. They’re writing the third stage. They’ve worked it out. They don’t have a beta to test it with the lenders and do all the due diligence that they’re doing. They said it’s probably two years out before this if it works with a lender, whether or not they use it. The data was amazing. They can tell borrower by borrower who might fail in a recession and how the borrower can change their behavior to make sure they make it through the recession without lowering limits or closing accounts or what we call punitive measures that they use to protect lender money.

Once again, they are looking forward and this product isn’t going to be done for months or probably years until it gets out to consumers. It doesn’t just happen right now that they decided to do it. They are at this point because they’ve taken data from the last few years, probably more, during the recession of what 680s stayed at 680 and what 680s dropped. That’s not just 680s, what 740s were able to hold onto their 740 during the height of the recession and which one of them lost it all. They are looking and remembering backward, taking that in and constantly moving forward.

I would have to say that old adage, “Those who fail to study history are doomed to repeat it.” That is not FICO. They’re already looking in their classes about what to do in a downturn. We don’t even go into the details.

There are many deep dives we need to do. They’re coming. As soon as Merrill and I sit down and compare notes, talk about it, you will have all of this information. It’s too much for one episode, though. Your ears will be bleeding.

We want you to know why is FICO meaningful to you? Why is it important that we are here or why you need to align your behavior with the FICO 40? The reason is that you want to be fundable. We want you to be fundable. FICO wants you to be fundable. Lenders want you to be fundable. When you’re fundable, everybody, especially and including you, are all making money. Everybody makes money. The bottom line is FICO is important because they are the standard by which everything is being measured and calculated. Your approval, even the limits and loans are going to be based on those criteria. Pay attention and make sure if you haven’t done so already, you’ve got to attend the bootcamp. Go to GetFundable.com. Click on the bootcamp. Be sure to come and watch.

I’m not a fan of many things in the universe, but I am a FICO fan. If they were a football team, I’d be sporting colors. We sport name badges, but I’d be sporting FICO colors, but for a reason. It’s not because they throw great parties at FICO World. They do, but it’s because this is the standard by which 90%, so I’m going to say all meaningful approvals are measured. They’re not going anywhere. We can count on them dialing in our fundability over and over the next generations to come. They’ve been doing it since ‘57. I’ll be here for as long as they are.

Thank you so much for letting me be at FICO World with you. I’m learning so much. Thank you for letting me share the crazy, awesome things that we’re learning here.

AYF 47 | FICO Score

FICO Score: FICO is not hiding anything, nor is any expense spared.

 

One of the main reasons why Jessica is here, it’s not because she’s a credit nerd like me, but since she is a nerd, she is also the keeper of the holy rules engine. We have 2-foot, 4-inch binders that are full of all of our optimization rules. We’re here. One of the meetings we had was to learn what platform we need to put those rules so that we can put it into our software and our fundability app.

We’re not hoarding all the information. We put it out in the world for you.

She trains all of our advisors so that they’re making the best decisions when building funding plans and optimization plans. Thank you for being here. I love that we’re doing it together and it’s in the right hands because our fundability rules engine is her domain and I’m thrilled that you’re running it.

I’m excited we’re going to have more episodes coming up. I hope I can share some more information and deep dive into what we’ve learned here.

It’s going to be crazy. Have a spectacular day. We’ll catch you on the inside of the next episode.

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About Jessica Guisinger Tabora

AYF 47 | FICO ScoreI develop mutually beneficial relationships by connecting CreditSense education and technology to the clients and students of trainers, coaches, and subject matter experts with the intent to help those clients and students become powerful and fundable borrowers and wealth builders.

I am also a Senior Fundability Advisor helping borrowers optimize their personal and business credit profiles.

At CreditSense we are committed to optimizing the borrowing experience for real estate investors, note buyers, private lenders, business owners, entrepreneurs, and savvy consumers nationwide.

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