Page 30 - AAGLA 2020-11
P. 30

 Member Update
WHAT’S A CREDIT SCORE?
The Best Credit Score for the Multifamily Housing Industry
By Becky Bower,
Contemporary Information Corporation (CIC)
redit scores (or “credit risk scores”) are widely used within the rental housing industry to gauge a rental applicant’s financial prowess. You know the drill – generally, the closer your score is to 850, the easier it is to
secure loans, lower interest rates, and rental housing. While you might know all about credit scores as a consumer, do you know the differences between the most common credit scoring models from a rental housing standpoint? We’re looking at the benefits of VantageScore vs. FICO when doing resident screening, and how credit scores are impacted by COVID-19.
“WHAT IS A CREDIT RISK SCORING MODEL?”
While there are tons of credit risk scoring models out on the market, the most used and referred to are VantageScore and FICO. These two models take a consumer’s credit information from the 3 credit bureaus and analyze it through their formula to generate a credit score.
Keep in mind that the credit scoring formula can differ depending on the purpose of the report. For example, the formula used to calculate the credit
score for a car loan might be different than the formula used for housing purposes as the model might weigh certain financial decisions differently. This means that everyone’s credit scores can be slightly different depending on what you are applying for. But do not worry, the difference between scores is usually small.
“ARE THERE ANY OTHER CREDIT RISK SCORING MODELS OTHER THAN FICO AND VANTAGESCORE?”
Yes! But be wary. FICO and VantageScore are the industry standard for a reason. Other, less-reputable scoring models might differ from your average 300- 850 scoring range by using a range that always favors the applicant or is skewed in favor of the company you are receiving it from. We have even seen some credit scoring models step away from numerals and send smiley faces, checkmarks, and other strange grading systems as their official credit score. This is why it’s important to get your resident
Please turn to page 32
  30
NOVEMBER 2020 • WWW.AAGLA.ORG
 


















































































   28   29   30   31   32