Understanding FICO® Scoring

[Revike]

Since many CC companies offer both prime and sub-prime cards, you can't just label each CC company as one or the other, and I don't think there's any easy way to distinguish individual accounts. For example, I originally applied for one Chase card, but I currently have four because Chase bought accounts from other CC issuers who had previously bought accounts, etc. The interest rates and credit limits for the four accounts are all over the map, and I'm sure a couple of them would have been considered sub-prime when opened. Chase would need to somehow individually classify each account, and then the CRA would need to apply a more complicated scoring formula, based on the classifications. And in reality, I treat all the accounts the same. It makes no difference to me whether I opened Account A ten years ago when my score was 600 and opened Account D five years ago when my score was 720, and I don't think having Account A on my record means I am more of a credit risk.

In addition, CC companies offer dozens of cards - some might require a 620 score, some a 630, some a 640, etc. It seems like it would be extremely complicated to classify each card, and then decide where to draw the line in order to penalize certain cards.

[Tuscani]

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fused111 wrote:

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Tuscani wrote:

The FICO formula does not distinguish between prime/subprime per se. The way it identifies a 'consumer finance' account is through the bureau subscription code -- the lender's ID# at the bureau -- that, among other things, indicates what kind of business it is. (This is also how mortgage and auto inquiries are distinguished from other inquiry types.) I believe the reason why the suggestion above won't work is because the portion of these codes that provide this identification are industrywide and not unique to a particular lender, although a lender typically has multiple subscriber codes for different parts of the business. So, for example, while the score can tell if the lender is considered a consumer finance company, it can't identify a particular product of that lender's as prime/subprime.

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Very interesting, how did you find this out?  Personally, do you think it would be fair for consumers if FICO had the capability to distinguish btw prime and subprime for loans and cc's and changed their scoring models accordingly?  For example, reward those who have more prime TL's than those who do not.

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I would tell you but I'd have to kill you. Sorry.

[fused]

You must be in the KNOW!

[ilovepizza]

After learning this very insightful information, would it be safe to say, if someone is having debt trouble and needs to consolidate, they are better off choosing another titled loan (if they have that option)?

Citi Financial also other titled installments:
..Besides => "Bill Consolidation" = (negative)

What about these titles below.
...."Extra Cash"
...."Re-Finance loans"
...."Unexpected Expenses"
....*Personal Loans*

I admit, I take out these loans some times for quick easy cash. Is this bad? Thank you in advance for your answers and opinions. :-)

[Tuscani]

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ilovepizza wrote:
After learning this very insightful information, would it be safe to say, if someone is having debt trouble and needs to consolidate, they are better off choosing another titled loan (if they have that option)?

Citi Financial also other titled installments:
..Besides => "Bill Consolidation" = (negative)

What about these titles below.
...."Extra Cash"
...."Re-Finance loans"
...."Unexpected Expenses"
....*Personal Loans*

I admit, I take out these loans some times for quick easy cash. Is this bad? Thank you in advance for your answers and opinions. :-)

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You need to make decisions that improves your quality of life and situation. I could care less about the type of account or affects on my score if I am saving money and less stressed.

[ilovepizza]

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Tuscani wrote:

You need to make decisions that improves your quality of life and situation. I could care less about the type of account or affects on my score if I am saving money and less stressed.

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Very true! But I ask this specifically because it effects me directly. I try to diversify credit when opportunity knocks. Ultimately, I have room to improve my scores. If I choose to take out one of the above higher interest loan titles to try and help my score next time I need money (instead of my low apr offers available from credit cards) would these titles effect my score negatively? I would hate to pay a higher % rate "Today" by choice to find out it had the opposite effect on my score. This question hits my wallet. So you see why this question is very important to me. I am going out of my way to diversify at a cost to save lots more money later.

Thanks again in advance.

[MidnightVoice]

My objective is to get at least two of my scores and two of my wife's over 720, preferably over 750, then I don't think it will make any difference what my scores are to how much anything costs me.

And I will be to the first point very soon, and the second early next year, with a total of two CCs, a gas card, a store card and a dentist's card (wife only) and a mortgage and one installment loan.  And a very low (by this boards standards) amount of available credit ($5,000 for me, $10,500 for my wife, who has this ridiclous dentist's card with a $5,500 limit to pay one $800 bill two years ago!).

I think paying bills over time and having low utilization does more for the score than all the fiddling around in the world 

[ilovepizza]

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MidnightVoice wrote:

does more for the score than all the fiddling around in the world

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And you will definitely get their in time. But what about those people that don't have 10-30 years to get there? A large part of my quality of life is determined by my FICO score. Too many of us use credit for needs and not wants. Money that we don't have because of events beyond our control. I would love lower interest rates for my bigger needs. That would make my life better. This is what I am trying to do. How many people were denied by instant approvals? Was it strictly on their FICO score? In my "opinion" I think "instant denials" work that way. Last year I was repeatedly denied based on credit scores. Score means everything some times, but not in all cases. Getting a car and a house are some of the few exceptions where a lower score doesn't have to stop you. But mostly every thing else that I found "personally" had a FICO score determine my outcome.

I think their should be a few more points on the FICO score for anyone belonging to this Forum. HooHaa! Hehe. But seriously I have done better fiddling than had I not. :-)

[ilovepizza]

You can also argue that someone was denied because of a bankruptcy. But wouldn't their score be low too. It is the same thing. If it were possible to have an 800 FICO score with a bankruptcy, I think in my "opinion" they would not be denied.

[Felicity]

I saw on a Suze Ormon show once that surprisingly, your score goes up some soon after a BK!

The reason being, you are not eligible to file another BK anytime soon.