If you could tweak the FICO score system

[MidnightVoice]

---

fused wrote:

I don't understand why medical collections are sometimes treated differenly than any other collection by mortgage lenders

---

Probably because most of them come from a bill that was not optional (unless one wanted to die).  If we could improve our Health System from the 36th best in the world, this might well go away 

[RobertEG]

I empathize with the suggestions, but lets face it, fellow consumers,  FICO scores are NOT generated for the purpose of giving relief to consumers in rapidly building FICO scores.  FICO is not a fairness evaluation for consumers, it is a statistical risk evlauation for the lendors, based on millions of prior credit reports on file, and their statistical analysis of future risk that it predicts.  Consider, for example, just the single topic of prior late payments, and the suggestion that they driop off after only two years.  That simply is a pipe dream, based on risk analysis.  FairIsaac has presented statistics before the FTC that shows that close to 50% of those who had prior serious delinquencies on their credit reports more than two years ago still exhibited future delinquencies after that two year clean period had passed, and that this risk dropped only about 10% per year thereafter for the next two years.  What creditor in their right mind would not want to have this proven risk factored into FICO? 

Credit mix is also statistically important, and begging to differ with other comments to the contrary, credit is not simply credit.  Revolving credit and unsecured installment loans are riskier to a creditor than, for example, auto and mortgage loans, which have collateral in support of their lending risk. And length of history in repayment of each type is statistically important.

The one suggestion I have seen that makes total sense, both from the consumer and creditor point of view, is that payment of a prior delinquent of collection account should clear that account from the collections scoring portion of the model.  As Hauling has stated, doing the right an honorable thing in paying off collections, even though it now may hurt your FICO score, makes total sense to me from either a consumer of creditor point of view.  Pay it, and it is simply erased from that category (but not the late payments portion of the model which led up to it). That is a FICO tweak that is both sensible and needed.

They have millions of credit reports that they analyze in their risk analysis.  Anecdotal and :"fairness" pleas by consumers are not a part of their risk analysis, and never will be.

If I could tweak the FICO model, I would have it give anything under my SSN an automatic 50 point FICO increase each month.  I have a better chance of having lunch with Jesus tomorrow at Subway...

Message Edited by RobertEG on 01-11-2008 09:40 PM

Message Edited by RobertEG on 01-11-2008 09:56 PM

[marty56]

The 2 year late removal was base on the fact that many lenders not use it has a crieria for giving credit.  Also the FICO score cant determine why the person was late.  I know people will say late is late but is it?  How many people here now pay of time becuase of online bill pay or other automatic bill payment methods? or that pay the biils now instead of their spouse or ex-spouse for that matter.. 

Also CCC have differnt criteria of what 30 days late means.  some mean 30 days late, others mean 1 days after the next statment date.  Also with GW and PFD on less then is owed, who really is a better credit risk?  Also can I exploit the fact the one CCC means 30 days by paying it on the 29th day so I can pay the next statment date CC on time?  Am I still a good risk?

As a side note deos the percent that FICO places in late payments need to be tweaked now since the news says more people are having trouble paying their CC biils?  Should more emphasis be placed on util or some other new criteria like change in balances or cash advances?

Message Edited by marty56 on 01-12-2008 09:51 AM

[haulingthescoreup]

There isn't a reason to tweak the formula because of current conditions. If anything, it's more relevant than ever.

FICO scores aren't created to show how one compares to the rest of the country's borrowers. They are meant to be predictive of how likely one is to pay back debt promptly. Past problems are legitimately noted, because if one somehow did not have a good approach to paying bills in the past (dingbat spouse was in charge of payments, had cash flow problems, ran up CC's not realizing this was bad), there will be a question mark floating around for a while, until the new payment history shows that things have truly changed.

I just object to fully-paid collections and charge-offs counting as much as partially or unpaid ones. I believe that the fact that they were paid shows some sort of improvement in willingness and ability to manage debt better in the future.

[marty56]

If I wanted to make an evil FICO score, it would reward people who always paid one day late so you could charge a late fee and also always made the minimum payment.  If you exceeded your CL, you get points.

I wonder which would hurt Capitol One more,  the charge offs or a  FICO that was 100% accurate in predicting people who would pay on time, then they would start to loose money on those late fees and over limit fees they would stop collecting.