FICO score is unreliable

[Involver]

I wouldn't really stress over an 809 vs a 799. I'd say your real-life credit concerns are pretty much negligible in either scenario.

[user5387]

To the OP, I would advise ignoring the stated reasons that come with your scores.  I'm in a similar situation to you, and don't find the listed reasons meaningful.

However, that is not to say that scores bounce around for no reason at all, but rather that the true reasons are often pretty subtle.

For example, slight changes in utilization can move your score up or down a few points.

Another example would be if some age factor like AAoA reaches a threshold and causes your score to change.

[arungupta2014]

My main point is that the parameters used to calculate this "FICO" score are unquantified like "balance too high" or "too many accounts". These kind of vague definitions are clearly anti-consumer.

The formula used to calculate FICO score is a black box and consumer has no understanding of it. There is no way for consumer to obtain FICO score unless they pay. FICO is making money off of consumers' data both ways, by selling information to lenders and by charging money from consumers to see their FICO scores. The entire concept is anti-consumer and must be stopped.

[azguy13]

The FICO scoring model algorithms are proprietary information and releasing them to the general pubic would completely defeat the purpose of the reasons a FICO score is developed. We only know what we do because some people have found techniques that generally work to raise/lower a score. 

If you were a bank, would you want the consumer to know exactly how they can manipulate their credit score to look more attractive? I agree that it is not right that we should pay for a score/report that determines our financial futures, but to say that it must be stopped is unrealistic. When it comes down to it, the system works well when determining risk of granting credit. 

And yes, FICO is making money. They are a business and that is their entire function. They would not be doing it for charity.

[user5387]

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@arungupta2014 wrote:

My main point is that the parameters used to calculate this "FICO" score are unquantified like "balance too high" or "too many accounts". These kind of vague definitions are clearly anti-consumer.

The formula used to calculate FICO score is a black box and consumer has no understanding of it. There is no way for consumer to obtain FICO score unless they pay. FICO is making money off of consumers' data both ways, by selling information to lenders and by charging money from consumers to see their FICO scores. The entire concept is anti-consumer and must be stopped.

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There's a lot of information available on how scores are calculated, for example this:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

If the complete algorithm was published, it wouldn't benefit most folks anyway, because the level of detail would be overwhelming -- pages and pages of tables and so on.

[bdhu2001]

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@arungupta2014 wrote:

My credit union supplies me with free monthly FICO score. Last motn my score was 809, this month it dropped to 799. The reason in the FICO report are:

The amount owed on your revolving accounts is too high.
You've recently been looking for credit.

Both are incorrect. I have checked my credit reports yesterday and I have not opened any new account. The only "new account" I see is because my last month mortgage company transitioned to a new system which caused a credit inquiry. This was done without my knowledge or consent. The mortgage is still with the same company. As such, this was not a new account opened by me and I sure haven't been looking for credit.

I use only two credit cards. Each card is paid in full every month. I have never paid a cent in credit card interest in last 14 years. The first card has a credit limit of $18,000 and current usage is about $110. The second card has credit limit of $22,000 and current usage is about $5400 out of which $3900 will paid as full statement balance on due date. So how much is "too high"?

I do not have any other active card accounts, no student loans, no car loans, no home equity loans...nothing except mortgage. All my credit reports are clear and do not report any issues as of yesterday.

So the reasons given by FICO are completely wrong and I assert that the method of FICO score generation borders on being unreliable. The FICO report mentions unquantifiable parameters like "too high" or "too many". They owe it to the consumer to clarify these terms with specific information.

Someone from myFICO please respond.

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Your FICO score is a moment in time. I had an Experian FICO mortgage score of 771 and the next day it was 757 and the only difference was a $654 balance on AmEX that has a $14,600 limit. Like you, I pay off AmEx everymonth, but the balance amount was different when the two companies pulled their reports. 

When I applied for my Mortgage loan, the guy told me to ignore the too many inquiries & too many revolving accounts. He said that those statements show on anyone who doesn't have a perfect score as a catch-all-phrase to explain not having 850.  Too high balance and too many balances are a bit more specific and they are the ones that catch us when we're in the high700s or low 800 FICO scores.

[bdhu2001]

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@arungupta2014 wrote:

Holy cow, 51 FICO models....!!!  I give up. To everyone who responded and clarified, I sincerely thank. I will just continue doing what I do to protect my credit and leave the credit decision to the powers be. This discussion was very enlightening and educating.

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It's not that big a deal.  The one you'll deal with most often is the bankcard score, then auto, & then mortgage. Keeping track of your bankcard score would tell you what most lenders are using.  Just understand your auto enhanced will probably be a few points higher and your mortgage will be 20-50 points lower.

[user5387]

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@bdhu2001 wrote:

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@arungupta2014 wrote:

Holy cow, 51 FICO models....!!!  I give up. To everyone who responded and clarified, I sincerely thank. I will just continue doing what I do to protect my credit and leave the credit decision to the powers be. This discussion was very enlightening and educating.

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It's not that big a deal.  The one you'll deal with most often is the bankcard score, then auto, & then mortgage. Keeping track of your bankcard score would tell you what most lenders are using.  Just understand your auto enhanced will probably be a few points higher and your mortgage will be 20-50 points lower.

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The fact that there are many scores in the lending business should not be an issue, if you use them as indicators rather than hanging on every point.

People often ask what is the minimum score required for a certain CC.  This seems misleading to me, since the approval process considers a bunch of things beyond score, and the score that's being used may be bankcard enhanced or proprietary, and thus not available to folks like you and me.

A simple way to keep a handle on your scores would be to oscillate between the 08 scores (Barclays, Discover, Walmart, MyFico), and the 04 scores (DCU, PSECU, EQ Score Power FICO product).

It's also worth keeping in mind that scores are correlated to each other, and mostly cover the same territory.

For example, it's safe to assume that payment history, utilization, derogatories, lots of new accounts, and so on, are big issues that need to be addressed.