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Fair Isaac is NOT fair

Senior Contributor

Re: Fair Isaac is NOT fair

 


marty56 wrote:

 All we ask is a "fair" shake.  All we want is to know the parameters we have to work with.  Nothing is regulated except the ability of the credit industry to hold us hostage.  And before I get a response that tells me not to use credit if I don't like it, that's really not the point of my post.

There is enough information here in the forum for anyone to play the FICO score game and win without knowing anything about the FICO formula and why CCCs do what they do.  Yes sometimes life happens and we have to revolve a balance or we pay late or even default on a card but the rules are simple once you know them and understand cause and effect on your score.

 

 


+1.

 

Valued Member

Re: Fair Isaac is NOT fair

If there are things going on, that one does not like, there are ways to change them. I would like to explain my thoughts in great detail here, however, it is quite likely that my post would be deleted, and maybe I would get kicked out of here also.

 

Here is, just a general thought:

 

Think about what we learned in school about how our country got started. What did those people do ???

 

Hint: the answer to the last question starts with the letter "R".

 

 

 

 

Highlighted

Re: Fair Isaac is NOT fair

Thanks for the responses everyone.  i think we have beat this topic to death

Community Leader
Epic Contributor

Re: Fair Isaac is NOT fair

FICO does not put "all their cards on the table," and disclose their credit scoring algoithms in detail , for many, many legitimate reasons.

First of all, they dont want to, because if they did, they could just be copied by anyone, thus making their product worthless.

Second of all, the intellectual property laws of the US provide a person or business the opportunity to make  a decision, when marketing any product or process, to either apply for a patent, and thus gain a 17-20 year "monopoly" in the business world, or to keep it as a "trade secret."  The advantage to obtaiing in patent is evident, but in exchange for obtaining a patent, the patentee must fulll disclose, and publish with the patent grant, how to make and use the invention.  So once the patent expires, it is in the public domain.

Some may try to retain the product or process as a "trade secret," not disclose it, and thus, taking a risk, of being able to use it forever.  Coke is the classic example of this decision.  They chose not to seek patent protection, which would have requried them to disclose fully their formula.  They must constantly take steps to ensure that their "trade secret" is not compromised, and hopefully, not reverse-engineered.

So, take a look at Fair Isaac.  They developed a process for credit risk analysis that was marketable.  They choose not to seek patent protection, but rather to keep it as a trade secret.  They have released a lot of general information about how the formula works, to their credi, but of course, the more detail they release, the higher the chance that someone can legitimately "reverse engineer" their algorithms, thus putting their product in the trash can.So they wont tell all.

If you look at it from the business perspective of Fair Isaac, I would say that they have been more than fair.

 

 

Senior Contributor

Re: Fair Isaac is NOT fair

 


RobertEG wrote:

FICO does not put "all their cards on the table," and disclose their credit scoring algoithms in detail , for many, many legitimate reasons.

First of all, they dont want to, because if they did, they could just be copied by anyone, thus making their product worthless.

Second of all, the intellectual property laws of the US provide a person or business the opportunity to make  a decision, when marketing any product or process, to either apply for a patent, and thus gain a 17-20 year "monopoly" in the business world, or to keep it as a "trade secret."  The advantage to obtaiing in patent is evident, but in exchange for obtaining a patent, the patentee must fulll disclose, and publish with the patent grant, how to make and use the invention.  So once the patent expires, it is in the public domain.

Some may try to retain the product or process as a "trade secret," not disclose it, and thus, taking a risk, of being able to use it forever.  Coke is the classic example of this decision.  They chose not to seek patent protection, which would have requried them to disclose fully their formula.  They must constantly take steps to ensure that their "trade secret" is not compromised, and hopefully, not reverse-engineered.

So, take a look at Fair Isaac.  They developed a process for credit risk analysis that was marketable.  They choose not to seek patent protection, but rather to keep it as a trade secret.  They have released a lot of general information about how the formula works, to their credi, but of course, the more detail they release, the higher the chance that someone can legitimately "reverse engineer" their algorithms, thus putting their product in the trash can.So they wont tell all.

If you look at it from the business perspective of Fair Isaac, I would say that they have been more than fair.

 

 


+1

 

 

I expect many of those who criticize Fair Isaac have a limited understanding of how markets, intellectual property, and the R&D enterprise actually function.  I'm in pharmaceutical R&D, another industry that tends to get vilified by people who don't understand the economic and scientific realities.  We cannot use trade secrets very much because we have to publish our data; my own employers have had several rounds of layoffs and will probably have more layoffs next year because a couple years from now the patent for one of our key products will expire.  Something most Americans don't realize is that although the patented drugs cost more here than they do in most other countries, generic drugs cost more in most other countries than they do here, and because generics are cheaper here the overall cost to patients for drugs, though higher than elsewhere, is not as much higher as most people think for the average patient.

 

What is unfair about pharma R&D is that because other rich countries control prices of patented drugs they do not pay their fair share of the R&D costs.  In a logical world Americans would pay somewhat less for patented drugs, while Germans, French, British, Australian, Swedish, etc would be somewhat more than at present.  What people like me do is not and cannot be inexpensive, academics are superb at basic science but most have little understanding of the huge difference between an idea and a marketable product (I sure didn't get this when I was in academia).

 

Also, at least some of the criticism of FICO amounts to blaming the messenger.  If it were possible to devise a scoring model that did a dramatically better job of predicting credit risk than FICO, in a competitive market somebody would do so and their customers would take business away from FICO's customers.

 

 

TU 791 02/11/2013, EQ 800 1/29/2011 , EX Plus FAKO 812, EX Vantage Score 955 3/19/2010 wife's EQ 9/23/2009 803
EX always was my highest when we could pull all three
Always remember: big print giveth, small print taketh away
If you dunno what tanstaafl means you must Google it
Valued Contributor

Re: Fair Isaac is NOT fair


3elizabeth wrote:

 

And in my mind, no matter how you cut it, it's very unfair to have years and years of good credit impacted by one slip up.  There is only a range of 500 points to work with and one late payment on a card that has been open ten years with no late payments before that takes a hit of 10% (if you're lucky)?   No dilution for good behavior.  That's fair?  


 

I beg to differ here. There certainly IS dilution for good behavior. Your past good behavior helps mitigate the damage from the late payment. While you still might take quite a hit, you don't have to start back at square one. Plus, those with many late payments ARE hurt by their past behavior.

New Visitor

Re: Fair Isaac is NOT fair

I used to have a lot of credit cards and then I noticed that some of them got canceled due to lack of usage. So I use to make sure they did not pull that on me be always keeping a small balance on them. You might just try to get more cards and keep small balances on them.

Moderator Emeritus

Re: Fair Isaac is NOT fair


Alejandro wrote:

I used to have a lot of credit cards and then I noticed that some of them got canceled due to lack of usage. So I use to make sure they did not pull that on me be always keeping a small balance on them. You might just try to get more cards and keep small balances on them.


Hello and welcome.

 

You found yourself a 2 year old thread which is fine but the original poster has not been back online since 8/2010.

 

But I appreciate your contribution to the discussion.