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WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...

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Anonymous
Not applicable

WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...

A lot of folks post comments wondering why they don't get a CLI where others have easily -- even people with lower FICO scores and incomes.

 

The answer is simple: FICO and other credit analysis organizations don't just provide creditors with FICO scores.  They provider creditors with analyses optionally as part of the package that's bought to analyze each creditee individually.

 

Pay attention to this FICO patent for risk assessment: "...the present invention of income risk model may also involve the use of input variables such as age; personal income; total debt; debt ratio (debt/available debt); number of times delinquent in last two years; savings account information (if one exist); residency (city, state, and zip code); years at current residence; own/rent status; total yearly income; highest level of education; education discipline/concentration; year attained; educational institution; years of full time work experience; current employer; length of time with present employer; self-employment (if any); part-time/full-time status; work city, state and zip code; job occupation area; employer's industry (name, SIC code); and total employees at place of work..."

 

This isn't on your credit reports typically, but the data does exist -- especially if you submit some of it yourself to creditors.  FICO also does know your history of data over time.  Just because CRAs furnish only real time data doesn't mean that data isn't harvested and resold as needed.  Remember, a creditor only needs to provide you with ONE reason for a decline on a new account or credit limit increase request and they can just bark back FICO reasoning even if that's not the entire truth.

 

Where you work, how long you've work there, how many employees work there, what your residential zip code is, etc: these things matter.  And creditors are paying FICO and others for that analysis.

 

One of the biggest errors in government-enforced consumer credit laws is that they're totally short sighted.  Sure, you can request your credit reports, your Lexis-Nexis reports, etc, but because no creditor is going to say "FICO risk assessment said your residential zip code sucks" since the law requires that they just give you ONE of the reasons for denial, not ALL the reasons.

 

So if you have a 780 FICO score but live in an area with a lot of delinquency but your cousin has a 650 FICO and lives in a posh neighborhood, you may get declined for a CLI while he gets a hefty once.  Remember we don't know what machinations go on in the machinery of credit assignment, all we know is that creditors just need to furnish us with the legal minimum excuse for saying no.

Message 1 of 15
14 REPLIES 14
Anonymous
Not applicable

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...

Good post and there's definitely a lot of truth to what you've said.  I agree that many people get caught up on the usual stuff like their scores, spend, etc. when there are plenty of other variables at play.  Perhaps some of these other variables should be mentioned when we're providing one another with data points on this forum and over time we'd be able to determine which of them may be most impactful to certain lenders and their decision making.

Message 2 of 15
Anonymous
Not applicable

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...

One of my clients is a major bank known for its loans and credit products and my client isn't in lending or banking at all but he's told me repeatedly that to get a great credit limit, he knows" unofficially" that zip code and job description are major points.  He said in his own department, some of his coworkers have really low credit limits even though they're more creditworthy: they just live in the wrong neighborhood.

 

In order to stay compliant with federal and local laws, you can't specifically judge a person on certain metrics, but as long as you can "blame FICO" it's enough.  And FICO has written reason codes that COULD be true even though they're not factually the reason for a denial.  Wrong zip code and oh look 2 new accounts this year?  Blame the new accounts.  Wrong job description and utilization over 10% on one account?  Blame the utilization.

 

FICO is a joke among lenders, I think, because they rely on their own measures and calculations for credit worth but can't necessarily use their own reasonings for denials.  FICO gives them an exit strategy of excuses.

Message 3 of 15
SouthJamaica
Mega Contributor

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...


@Anonymous wrote:

A lot of folks post comments wondering why they don't get a CLI where others have easily -- even people with lower FICO scores and incomes.

 

The answer is simple: FICO and other credit analysis organizations don't just provide creditors with FICO scores.  They provider creditors with analyses optionally as part of the package that's bought to analyze each creditee individually.

 

Pay attention to this FICO patent for risk assessment: "...the present invention of income risk model may also involve the use of input variables such as age; personal income; total debt; debt ratio (debt/available debt); number of times delinquent in last two years; savings account information (if one exist); residency (city, state, and zip code); years at current residence; own/rent status; total yearly income; highest level of education; education discipline/concentration; year attained; educational institution; years of full time work experience; current employer; length of time with present employer; self-employment (if any); part-time/full-time status; work city, state and zip code; job occupation area; employer's industry (name, SIC code); and total employees at place of work..."

 

This isn't on your credit reports typically, but the data does exist -- especially if you submit some of it yourself to creditors.  FICO also does know your history of data over time.  Just because CRAs furnish only real time data doesn't mean that data isn't harvested and resold as needed.  Remember, a creditor only needs to provide you with ONE reason for a decline on a new account or credit limit increase request and they can just bark back FICO reasoning even if that's not the entire truth.

 

Where you work, how long you've work there, how many employees work there, what your residential zip code is, etc: these things matter.  And creditors are paying FICO and others for that analysis.

 

One of the biggest errors in government-enforced consumer credit laws is that they're totally short sighted.  Sure, you can request your credit reports, your Lexis-Nexis reports, etc, but because no creditor is going to say "FICO risk assessment said your residential zip code sucks" since the law requires that they just give you ONE of the reasons for denial, not ALL the reasons.

 

So if you have a 780 FICO score but live in an area with a lot of delinquency but your cousin has a 650 FICO and lives in a posh neighborhood, you may get declined for a CLI while he gets a hefty once.  Remember we don't know what machinations go on in the machinery of credit assignment, all we know is that creditors just need to furnish us with the legal minimum excuse for saying no.


Fascinating.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 4 of 15
Revelate
Moderator Emeritus

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...


@Anonymous wrote:

One of my clients is a major bank known for its loans and credit products and my client isn't in lending or banking at all but he's told me repeatedly that to get a great credit limit, he knows" unofficially" that zip code and job description are major points.  He said in his own department, some of his coworkers have really low credit limits even though they're more creditworthy: they just live in the wrong neighborhood.

 

In order to stay compliant with federal and local laws, you can't specifically judge a person on certain metrics, but as long as you can "blame FICO" it's enough.  And FICO has written reason codes that COULD be true even though they're not factually the reason for a denial.  Wrong zip code and oh look 2 new accounts this year?  Blame the new accounts.  Wrong job description and utilization over 10% on one account?  Blame the utilization.

 

FICO is a joke among lenders, I think, because they rely on their own measures and calculations for credit worth but can't necessarily use their own reasonings for denials.  FICO gives them an exit strategy of excuses.


 

I don't know, there's a lot of FUD that gets passed around lenders, and unless you know very select people and happen to be drinking buddies with them, they aren't going to have information on the algorithm or you're not likely to get it anyway.  

 

I'd be very leery of taking your buddy's report as accurate; I'm not saying it doesn't happen, but suggesting most if not all lenders are breaking federal law, is kind of a stretch.

 

If FICO was a joke they wouldn't pull it for anything except mortgage, Chase does just fine with denials on their internal score alone for most if not all of their CC products these days.  Banks aren't stupid, while they may pay for compliance purposes if that was the rationale they'd be pulling Vantage: for a fact, it is cheaper. I can assure you having worked in a couple lenders (not majors) directly and unlike some I had both curiousity and source code access that credit scores do matter in their UW decisioning.




        
Message 5 of 15
Anonymous
Not applicable

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...

 

So here's my question: Is this data being centralized into the credit bureau agency? Or is this analysis being done on data owned only by my bank. 

 

For example, I know that CITI knows where I work and how much I earn, because I've told them. However, I've never seen that information on my credit report. If CITI is using that information in determining a CLI, that makes total sense to me -- and I'd expect that, since I gave CITI that information just for that purpose.

 

But are you suggesting that the bureaus also now have that information?

 

In that case, I have a big problem: I'd like to review it and make sure that it's correct, but I've never seen that sort of information on a credit report. So how can I verify that this information they are basing decisions on is accurate, in that case?

 

If it's just that they're contracted with CITI to provide this calculation using CITI owned data that CITI retains (or whatever other bank, using CITI as an example) I'm fine with that. 

Message 6 of 15
Thomas_Thumb
Senior Contributor

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...


@Revelate wrote:

@Anonymous wrote:

One of my clients is a major bank known for its loans and credit products and my client isn't in lending or banking at all but he's told me repeatedly that to get a great credit limit, he knows" unofficially" that zip code and job description are major points.  He said in his own department, some of his coworkers have really low credit limits even though they're more creditworthy: they just live in the wrong neighborhood.

 

In order to stay compliant with federal and local laws, you can't specifically judge a person on certain metrics, but as long as you can "blame FICO" it's enough.  And FICO has written reason codes that COULD be true even though they're not factually the reason for a denial.  Wrong zip code and oh look 2 new accounts this year?  Blame the new accounts.  Wrong job description and utilization over 10% on one account?  Blame the utilization.

 

FICO is a joke among lenders, I think, because they rely on their own measures and calculations for credit worth but can't necessarily use their own reasonings for denials.  FICO gives them an exit strategy of excuses.


 

I don't know, there's a lot of FUD that gets passed around lenders, and unless you know very select people and happen to be drinking buddies with them, they aren't going to have information on the algorithm or you're not likely to get it anyway.  

 

I'd be very leery of taking your buddy's report as accurate; I'm not saying it doesn't happen, but suggesting most if not all lenders are breaking federal law, is kind of a stretch.

 

If FICO was a joke they wouldn't pull it for anything except mortgage, Chase does just fine with denials on their internal score alone for most if not all of their CC products these days.  Banks aren't stupid, while they may pay for compliance purposes if that was the rationale they'd be pulling Vantage: for a fact, it is cheaper. I can assure you having worked in a couple lenders (not majors) directly and unlike some I had both curiousity and source code access that credit scores do matter in their UW decisioning.


Zip codes are used by the insurance industry in evaluating insurance risk and setting premiums. However, that is quite different the lending industry.

 

Banks can gain access to other information and scores on applicants but, those sources are not Fico. Examples are "The Work Number" by Equifax - employment history with salary (i pulled a free copy) and various reports from LexisNexis (I pulled a few of these - some free, some not). I would think where one lives cannot be a condition for denying a loan (officially) but employment history: job stability/income from 3rd party sources are valid.

 

Question: What requirements do lenders have in reporting reasons why CLIs are denied? Hopefully not too onerous as credit is a privilege not a right.

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 7 of 15
Anonymous
Not applicable

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...

Adverse action is defined in section 701(d)(6) of ECOA: https://www.fdic.gov/regulations/laws/rules/6000-1200.html

 

If you read that, you'll see that it's pretty bland overall and doesn't really demand that creditors specifically give EVERY detail, but ANY detail as to why they took adverse action.  See 701(d)(2)(A) -- nowhere does it demand ALL reasons.  Just "a statement of reasons".  List some reasons, good enough.

 

I also don't believe where you live is considered a discriminatory action.  

Message 8 of 15
Whitebird
Established Member

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...

It's been so long since I've posted, I hope I'm replying correctly.

 

ITA with what you've said, but then I nearly always do. Dull, I know.

 

I want to address the issue of "internal scores." At some point in the past I was reading a textbook on credit, developing scorecards, whatever... Now, a great deal of that textbook was above my pay grade, so to speak (lots of advanced math) but that's the way I learn. There was a discussion on "custom scores" that some financial institutions use. The discussion specifically centered around Amex (true or just an example, I don't recall--hey I'm old!) and why they would want their own "internal score." The main reason was cost.

 

There is an initial large upfront cost paid to FICO--yes, FICO was/is hired to develop this non-FICO internal score!  After the upfront cost then Amex would only pay pennies--as opposed to dollars--for access to those scores as they had underwritten the cost for score development.

 

But, there was another reason. Think about the FICO scores that are specific to certain lenders, such as the Auto-Enhanced score or the Bankcard score. Those scores specifically evaluate the customers that those lenders target and are said to be a bit more accurate predictor of outcomes but only within that specific customer base. Amex likely also has a targeted customer base of some kind and apparently they believe that these customized internal scores serve them well, both in terms of cost and predicted outcomes. I know Amex provides regular Experian scores to cardholders, but I'm fuzzy about whether Amex also uses the traditional FICO score internally. I'd think yes, but what do I know. I know I've said "Amex" here but one could well substitute "Chase."

 

Revelate, is what I've related your general understanding of these internal scores?

 

 

FICO 08 MyFico

Equifax 850 Mar 2017
TransUnion 847 Mar 2017
Experian 847 Mar 2017
Message 9 of 15
Anonymous
Not applicable

Re: WHY CLI? Not just your FICO score, or your history with creditor, or how much you spend...

The biggest cost to using internal scores is to pay for the ongoing analysis of how well those internal scores match reality.  Paying FICO means you're supporting an organization whose sole purpose is to not just give a score to a borrower but also analyze how accurately that score held up over time.

 

A bank doesn't want to pay for data crunchers to constantly re-analyze risk.  I'm in the risk abatement industry and my customers always will puke at my invoices the first few months, but the first time one of their competitors has a huge risk event, they thank me profusely for the work I do to protect their interests.

 

Amex obvious can afford their own internal scoring measure because they're not just a bank but they're also the merchant provider to their bank.  Most banks who license MC or Visa or Amex are not the merchant provider so they're not capable of hiring risk analyzes to go over the data constantly and tweak whatever internal score they came up with -- paying FICO for that risk mitigation is cheap insurance.  Also a bank pays FICO for help with abiding the various consumer lending laws and regulations since FICO's score and reason codes give the bank the ammo they need to defend their AA tactics against consumers.

 

 

Message 10 of 15
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