Orion’s brokers know that any loan approval involves an analysis of the five Cs of credit: capacity, capital, conditions, character, and collateral. As we approach the end of September, rates continue to hit multi-year highs but mortgage pricing is only one part of the equation. We continue to hear from our brokers that credit quality is good, but that some investors or lenders are straining to “travel down the credit curve” in a search for new business. We don’t necessarily think that is wise, but feel that it is good for our brokers to have a good grasp of credit and what makes up a credit score.

Recall that a few years ago FICO Score 10 was rolled out which takes into account a consumer’s account balances and missed payments over the last two years. Analysts estimated that about 40 million U.S. consumers saw their score drop but another 70 million saw them rise as a result of the bigger gap between consumers deemed to be good and bad credit risks. Consumers who are already “good” credit risks (680 or above)may see their scores increase, those with current scores at 600 or below saw them drop.

Orion’s brokers know credit inside and out. A consumer’s utilization of credit limits matter: Consumers who consistently use all of their credit limit(s) usually see a downgrade in score. And FICO Score 10 weighs delinquencies, especially those in the last two years, more heavily than past models, putting borrowers with late payments on their records at a disadvantage. And warn clients about personal loans: Fair Isaac flags borrowers who apply for them, as they are generally considered riskier than other financial products.

The model incorporates consumers’ debt levels, considering account balances for the previous 24-plusmonths, while prior FICO scores have focused on more recent account balances. Consumers who fall or have fallen behind on paying their debts, as well as those with high credit utilization ratios in the past two years, are seeing a decrease in their score.

Orion’s brokers have plenty of borrowers with already good credit, and the current model provides a boost and helps increase loan program options, lower fees, and rates that the higher credit score would get them. Lenders/services are indeed seeing lower default rates, a fine thing for prices in the secondary markets. And fewer problems help Orion offer better rates and pricing!

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