Sick and Tired of scores running the world

[bluescale]

I'm a flaming liberal, but I get tired of constant calls for the government to regulate and mandate every aspect of free enterprise that inconveniences us.  Credit scoring is simply a series of statistical algorithms that is marketed as a predictor of default risk.  Each lender decides what model it feels best maximizes the risk/reward ratio they find acceptable.  Many purchase a model from Fair Isaac - either canned, or customized.  Other purchase a model from someone else.  Some build their own model.  I don't see why we need to regulate that too tightly.  

Fair Isaac and their ilk create a product.  When we buy that product, or support a lender who buys that product, we tacitly agree with the system.  If you don't want to participate, don't borrow money.  It's difficult to do in this day and age, but it's not impossible.  I know seeral people who live quite comfortably on cash only.  All of this is coming from someone who has plenty of gripes out this industry.  As much as I don't like the credit scoring system, I choose to participate in the system because it affords me conveniences and luxuries I wouldn't have otherwise.

What I don't understand is why applying for credit hurts you in the first place.  I understand why opening a new credit line hurts you - your exposure is higher.  But if you apply for a loan or creditline, then decide the terms don't make sense for you, that shouldn't be a negative.  That seems like good financial sense sense to me.  Of course, I haven't built any statistical models to back that up.

[ChrisinKC]

I wonder what data was used to determine
that having an account with a $0.00 balance makes you a higher risk of missing a payment or defaulting on a loan. When you pay off a mortgage or auto loan, your score is lowered. How is it that someone who paid every month for 10 years, without ever being late, be considered a higher risk of missing a payment or defaulting when they pay off their 30 year loan 20 years early AND they have no payment due? How is it even possible to miss a payment or default on a loan when you owe nothing and no payment is due? It's not possible, but yet your score is lowered, which means you're more likely to miss a payment or default. From my TU credit report from myFico.com - "The reason people with higher FICO scores get lower interest rates is because they pose less risk of missing a payment or defaulting on a loan".

Hmmmm, so I guess when I have no payment due, I can still miss a payment that isn't even due?

This is a perfect example of why you SHOULD be demanding change.

Furthermore, how do you like to have your score artificially lowered by financial institutions putting invalid and inaccurate information on your credit report? Say, for example, today your score is 800. Tomorrow one of you lenders reports you're 120 days late on one of your accounts that is closed with a $0.00 balance and has been for multiple months. You know this isn't correct, but it was reported and now your score drops 70 points.

You dispute that and the information is removed. Then you run your score again. Did your score return to 800?

The answer is no. You'll gain back SOME points, but not all. Why, why don't you get back ALL of the points that were lost when the invalid and inaccurate information was added to your report?

This recently happened to me, and I nearly lost the house I'm buying because of it.

Again, this is ANOTHER perfect example of what needs to be changed.

But if you want to sit idly by and accept these things and pay higher rates for no valid reason,then, well, I won't say what I'm thinking.

Let's just continue doing nothing and let these things continue to screw people. Oh, and let's get rid of every other law that has ever been put into place to protect anyone. Murder is now legal, members of Congress can now be "legally" bought out, just no laws. Let's get rid of them all. We certainly don't want to regulate or mandate anything, no matter how unfair it is.

[Marc334]

My opinion is somewhere in the middle of this.  Due to the fact that credit reports are so frequently incorrect, the CRA should have to give consumers unlimited access to it OR face civil liability for any damages caused by incorrect information.  As far as getting a score, if I authorize a hard pull the CRA or any third party including a lenders and landlords should be able to transform my credit report into a number without providing a method for us to see it beforehand.

As far as I know, your FICO score does not include anything that isn't stated on your credit report.  Said in another way, there isn't a credit report I see and a more detailed one that a lendors sees.