You got that right, brother.
marty56 wrote:Would you really trust the government to manage our credit?
masdeocho wrote:The FICO score measures the PROBABILITY of paying back debt, not the ABILITY.
masdeocho wrote:The FICO score measures the PROBABILITY of paying back debt, not the ABILITY.No - actually, it does not.Think about what has been said on this thread - by myself and others who use CCs to their full advantage, including rewards programs. I have never missed making any payment on time, and in full, in decades of using a wide range of credit instruments. Yet FICO is so hung up on the % of my credit limit that is outstanding at the moment the monthly statement issues that it cannot possibly properly judge my "probability of paying back debt". To do that Fair Issac needs to modify their algorithms to reflect the PIF behavior of many CC holders, which would only require a very minor adjustment in the data they consider.This has been my point since my original posting - that a relatively minor improvement to the analysis would make a measurable improvement in the FICO scoring system, and I haven't seen anyone rebut this. The comments that "it is what it is" and "just play the game" and so forth aren't really responsive. I know how to "play the game" but the real question is...........WHY SHOULDN'T FICO IMPROVE ITS SCORING SYSTEM ??I am not a FICO/FI employee, but.....First - FICO deals in statistical probabilty, not individual cases. If you want individual situations to be considered, manual review is the answer.Second - improvements. From a business perspective, FI does what any business should do in a Capitalist society - it seeks to make profit whilst satisfying its customers. We are not its customers, it has no need to satisfy us. If its customers demand improvements, then it should be working on them. If we demand improvements, we don't count until we get the legislature behind us.
just_curious wrote:according to FICO, I charge too much compared to my credit limits...Why no mortgage? I paid it off in cash with the proceeds of one of the companies I sold a few years ago....And, of course, the idea I use too much of my credit limits is sort of funny when two of my AMEX cards have no limits at all....I saw in the mentioned thread the idea that income and wealth don't matter but only the willingness to actually make payments in full and on time. Well, I have for over three decades, yet I rank in the middle of the US population? It's nuts.
FICO scores are not always higher is better. Ponder this....
Put yourself in the shoes of the credit card company, who is afterall both the customer and ultimate evaluator of what a FICO score means to them in their credit lending decisions.
Every credit card agreement has a provision that if you have any report of a late payment, with them or anyone else, they can immediately invalidate any prior rate with you, and jack their new rate to the limit of their discretion.
So they look at dude 1 with a 730-740 score. He shows an occasional late payment every year or so, but never goes 60+ days over, thus justifying his good credit rating. A little shaky, but overall of little statistical risk to go into any serious default, and thus risk. Dude 1 is credit card revenue heaven.
They also see dude 2 who has a score of 780+, who got that great score by having absolutely NO late payments on his credit report. Is dude 2 more desirable? Hmmm...
Would you, as a lendor, see dude 1 or dude 2 as a better source of potential revenue versus risk?
You grant dude 1 a low regular introductory rate, maybe a CCL increase, or low balance transfer rate,, whatever he is seeking. Dude 1 struts and puffs, and feels like he is now gold, and jumps at it! Yet probability shows that dude 1 will most likely screw up and make a single late payment somewhere in his credit universe within the next year or so, giving you, the creditor, the ability to wipe out his current low rates, and now soak him with any rate of your choosing. CC rates are exempt from usury laws. You know that dude 1 is not aware that even a late payment on a competitors card gives you the contract right to up his rate on your card. Mr. Lendor loves you, dude 1! And Mr. Lendor, also knows that there is low probability, from his credit history, that dude 1 will thereafter let payments go beyond that one single digression. Dude 1 learns his lesson, but one 30-day late too late. So you have a reliable customer that you now have sucked into the web of your default rate.
You then look at dude 2, the 780+ FICO score dude. Little probability that he will fall into your rate hike gambit, for his score shows that he doesn’t miss any payments.
As George Thorogood would wail….who do you love?