Credit Scores Part 15

Finally, it is important to note that there are different versions of credit scores, but most operate in a similar manner to the one we have discussed in this article. Also, the use of credit scores allows for decisions (and turndowns) to be made a lot faster and more efficiently when compared to typical turnaround time in a pre-credit scoring loan approval process in the past.

I also believe that the use of credit scores has materially reduced the subjective nature of how many loans and other decisions were made in the past. As financial service professionals, we must ensure equity and make decisions based on accurate and objective data not legacy biases or unfair assumptions.?

It is also important to note that FICO scores and other tools used to make loan and funding decisions are dynamic not static in nature. This is very important and if a SME or consumer has had a poor historical credit performance, there are many legitimate ways for corrective measures to be taken by them to improve the end numeric result. As the consumers and SMEs performance improves over time, more favorable patterns of behavior replace older data and an overall improvement in a FICO score can occur. This results in a win/win scenario for both the lender (who now can move forward) and the SME or consumer who is rewarded with lower interest costs and more favorable other terms than ever before. ?

The result of SMEs having better FICO scores is that more credit that is equitably priced and structured is readily available in the marketplace and SMEs and consumers benefit from both a lower cost of and a greater supply of capital. By utilizing credit scoring in a professional firm like ours, we improve our funding process, and this makes it more cost effective and efficient. This provides us the opportunity to pass along these savings to our SME clients and become even be more competitive in a very challenging and competitive marketplace today.?