Hey, doctort.
Yeah,the whole world of credit scoring is a closely guarded trade secret, but on big particpant in the process made a huge mistake, and put into the public domain how "bucketing," or scoring under different criteria, probably works. If you want to see how "bucketing" really works, I refer you to the published disclosure in U.S. Patent No. 6,202,053, by USA Bank. (obtainable from the Patent Office site at uspto.gov). I think that its discloure is a bit definitive.
Most major companies that generate credit scores dont pass thier trade secrets into the public domain, but if you apply for and secrure a U.S. patent, full discosure is mandated. This is the most definitive discussion of "bucketing" that you will probably find, and is from a major bank.
It describes their scoring algorithm based on “buckets.” An interesting read.
First cut is made based on whether the credit file is “thick” or “thin.” In general, a thin file is less than three trade lines, or no credit card.
A second major branch is based on delinquencies. Files are classified as “clean” or “dirty”, based on the absence or presence of a major delinquency in the file, which is defined as a late of 60+, or a CO, CA, or PR.
A third major branch is %util on revolving accounts, with various sub-branches thereunder, depending upon the %util.
A fourth major branch is length of credit history. They use less than 10 years, or 10+ years as a primary breakdown.
There are sub-branches off of these major branches, which in all, match approximately the 12 major buckets that are reportedly used by FICO.
Fair isaac has, of course,never appliied for patents, and thus has not chosen to pass their trade e secrets into the public domain.
But Bank ONe did.
12 branches.
