I don't think CRAs are EVIL --- just a stupid invasion of our privacy. If the FICO scores were worth a **bleep**, then all three agencies wouldn't have such disparate scores. If you want to, you can play with the scores --- like "piggy backing." But the way things are, they are unfair (so much for the fairIsaac) --- they present a one-dimensional aspect of a person that does not necessarily represent the true picture.
It's like cramming for the SAT --- it doesn't mean your THAT smart. it means that you've learned how to take the stupid test.
Now only that, if CRAs were worth a **bleep**, why is it that we are ALWAYS engaged in constantly checking our reports for errors, even encourged to do so. Because CRAs are the biggest screw-ups in the financial world.
Let me remind you of one financial rule that is all over the investment world. Look at ANY propectus --- ANY PROSPECTUS --- and there will be, in very small letters --- "Past performance is no guarantee of future returns." That means your money can go up in smoke and there is no recourse short of fraud. Your money is unsecured. But if a bank wants to deny a home loan, A SECURED DEBT, they do so without consideration that "Past performance is no guarantee ..." even of bad results. If that were the case, 90% of the investment funds out there would be out of business.
As to MY FICO scores --- NOYB. However, I will tell you that I boosted my FICO scores by a quite legitimate method --- playing the game. I am still plagued, however, by those assinine negative reports.
They aren't out to get us. We are not important. The problem is, we are not the customers of the CRAs. We are the products they sell. If the products produce alot of income for the end customer (lenders that charge higher rates), then why would you want to fix what isn't broke in their eyes?
I never said that they were out to get us. I'm not paranoid. I just say that they are a useless impediment to honest people.
If a bank wants to know if they should give us a loan or not --- let them do some due diligence, like they used to --- not rely on a bunch of losers.
Yes --- we are the product --- or at least our backgrounds are. Let's cut off the supply. Start a campaign to have letters written to the CRAs demanding that they no longer can save or send credit information on us; that all previous permissions to that effect are rescinded and that any received henceforth are to be considered in error. Maybe we should just file a class action in the name of ALL people listed on these CRAs.
That would dry up these clowns' supply.
But if you think CRAs are screwed up, I'll bet you never heard of the MIB --- Medical Information Bureau --- which was set up by the insurance industry and does for it what the CRAs do for banks. Think your medical records are private? Think again. So what if you're standing 8 feet behind some guy who's picking up a prescription. His prescription and YOURS are in a computer at the MIB.
Either we screw these guys now or we'll be in deep kimchee later on.
The problem with lenders going back to "due diligence" is that the costs of lending money goes up. Therefore even if you are considered a good credit risk your rates will be higher than what could be offered by using CRAs.
Good thought, but not true. Before, FICO, banks did their own due diligence and selected their business accordingly --- and yet interest rates didn't suffer because of it. Today, banks and other lenders are too damned lazy and greedy. They rely on losers like Fair Isaac to provide them with a brainless way of doing business and pocket the net. There is NOTHING magic about a FICO score. Your numbers on your most recent eye exam have greater validity and are more useful.
Like I've said before --- it's like to stupidity of the SAT scores --- another way for lazy, unthinking people to NOT make decisions on their own. Has the SAT helped improve college education any?
In 2003, the government surveyed college graduates to test how well they could read texts and draw inferences. Only 31% (less than 2/3) were able to complete these basic tasks at a proficient level, down from a pitiful 40% ten years earlier. Less than half of all college graduates graduate with a broad proficiency in math and reading. So, how have SAT scores helped? --- especially since ETS keep dumbing down the tests.
You may ask why I bring this up? Because its directly analogous to the FICO situation. Numbers without meaning are given meaning.
FICO scores have not improved the level of foreclosures, for example. In fact, the level of home foreclosures in on an upswing. Why? Because tons of over-anxious, poorly prepared people jumped into 1% teaser mortgages with negative amortization that, after five years left them with even bigger monthly payments than they would have had before. And the real estate market melted, leaving them with the promises of big capital gains that were never realized.
Banks used FICO scores to approve those loans --- without considering the consequences of the type of loan, the nature of the market, and whether or not there was a likelihood of the owner being able to make the future payments. And yet FICO will ruin these people in the future, 7 - 10 years, because they were given loans --- largely based on those scores --- that they should never have gotten, and the foreclosure will be reflected in the FICO scores.
If banks were really doing the due diligence that they did for so many years, your loan application would consider you as you, as you are now, and not some moronic number created by brainless people for brainless people.
Maybe Fair Isaac and the CRAs aren't evil --- but they are a close approximation.
Yes.. Forclosures are on the rise. I assume you are alluding to the "subprime" mortgage field when stating that lenders used FICO scores to approve customers who where not in a good position to buy a home. It isn't that higher FICOs allowed people to qualify for the homes. Rather some lenders lowered their standards. In the mid 90s if you had a 580 fico you needed a large down payment (10% or more) and you would have to provide 2yrs tax returns and only allowed 40% for DTI. Up till recently if you had a fico of 580 you could get into a home with no money down and no income verification and a DTI of 50%. These lenders acted rectlessly and they and their consumers suffered for it.
I will agree that banks did lower their standards somewhat. Mortgage insurance (miracle mortgages) did a good deal to help make them complacent. Today, nobody will look at you with a FICO less than 660. But this all goes back to what I was saying --- whether or not you pick a 580, a 660, or a 720 --- banks and the FICO "geniuses" have no idea of what it is all about. The numbers in and of themselves are useless, yet thay have taken on a meaning and life of their own that are not justified.
If the banks had not looked at the FICO scores and were froced to really do due diligence, lots of those negatively amortized loans would never have been issued. People may have had to buy more modest homes, but they wouldn't be in deep kimchee now.
I used a legitimate strategy (not piggy backing) to boost my FICO scores. I discussed it with a long-time mortgage broker who told me it would never work because this and this and this in the FICO method. I did it anyway. My scores went up 44 to 93 points (depending on the CRA). So much for knowing how FICO works.
Doesn't this last part just prove my point? 44 to 93 points!!!! If FICO were logical, systematized and meaningful, the disparity wouldn't be there. And because of those stupid OLD negative statements, I am still fighting.
Oh don't get me wrong, fact is many many brokers and loan officers and even a fair amount of underwriters don't know jack when it comes to how credit is scored and what affects it.Your example with the broker you mentioned is an excellent example.
I've worked for various lenders over the past 5yrs; auto, credit cards, and mortgages. A year and a half ago I started my current position, underwriter a JPMorgan. I have learned more in the last 1.5yr than the previous four.
Keep in mind that FICO is not the end all. The most extreme example I can think of is two customers I had recently. The 1st had a fico of 608 with several charge offs and the 2nd was in the 720s with not one late. I was able to lend more at much lower rate to the 1st customer than the 2nd. The reason was: the 608 customer had lived in the same home for 35yrs, been at the same employer for 33yrs, had a checking & savings with my employer as well as several loans and credit cards that had all been paid on time. While the 720 customer had moved twice in the past yr, changed employers 3 times in two yrs and did not have any accounts with my employer. The 720 was not stable the 608 was stable and showed loyalty to my employer so I gave her a lower rate and more money.