topic Re: If you could tweak the FICO score system in Understanding FICO® Scoring

If you could tweak the FICO score system

marty56 — Thu, 10 Jan 2008 17:48:24 GMT

Here are my changes:

1. Lates drop off in 2 years. No GW.

2. PFD takes 2 years to drop off. PFD in 2 years.

3. No AU

4. INQs dont count

5. Medical collections/accounts cant be reported unless it was done through an exension of credit (LASIX with say 2 years no paymrnts no interest).

6. No credit mix. Credit is credit.

7. Score hit for CL increase (temporary). Treated like new account.

8. Score hit for CFL.

9. Same inpact on score for new credit regardless of score and bucket

Just my thoughts.

Message Edited by marty56 on 01-10-2008 09:48 AM

Re: If you could tweak the FICO score system

haulingthescoreup — Thu, 10 Jan 2008 12:24:49 GMT

I like #1 and #2!

I'll add one: I don't have collections or charge-offs, but I think that if old debt is paid in full --and I mean the original amount plus a reasonable annual interest, not all the crap that gets glued on to it --the score ding should be cut in half. There are too many disincentives to pay less than originally charged, or not at all. You shouldn't be so penalized for trying to do the honorable thing.

Re: If you could tweak the FICO score system

marty56 — Thu, 10 Jan 2008 15:16:16 GMT

I will expand item #1 to cover all debt PIF Yes also I think people who try to hinestly pay the debt back desrve a break.

Re: If you could tweak the FICO score system

MidnightVoice — Thu, 10 Jan 2008 15:51:00 GMT

marty56 wrote:
I will expand item #1 to cover all debt PIF Yes also I think people who try to honestly pay the debt back deserve a break.

I totally agree

Re: If you could tweak the FICO score system

Anonymous — Thu, 10 Jan 2008 19:05:04 GMT

My changes would be:

1. Allow one and only one AU to count, unless it can be somehow linked to a family member - then allow 2. But don't give full credit for these. Taking ALL AU's away as FICO 08 plans to will really tank alot of young people scores as well as spouse's who rely on their partner's cards.

2. Cap all negative reporting at 5 years, including all BK chapters, open collections, liens, etc. 5 years is enough of a penalty if the user cleans up their act.

3. Allow 1 or 2 inquiries per year without dinging the score. And, this is important, require all inquiries to state WHY the hard pull is occurring. It is senseless to get your score lowered due to opening a checking account or other purpose that will never cause you to increase your debt. This is my biggie.

4. Retain history of closed accounts forever, for the sole purpose of 'age of file'. If you open an account in 1987, close it in 1995 because you find a better card (lower int rate, better rewards, etc), closing the account should NOT hurt you. Don't report it on the credit report if you want, but keep the history in the credit file somewhere for purposes of calculating age of file.

This would, in my opinion, better predict risk than the current system.

Re: If you could tweak the FICO score system

MidnightVoice — Thu, 10 Jan 2008 19:11:50 GMT

Boscoe wrote:

My changes would be:

3. Allow 1 or 2 inquiries per year without dinging the score. And, this is important, require all inquiries to state WHY the hard pull is occurring. It is senseless to get your score lowered due to opening a checking account or other purpose that will never cause you to increase your debt. This is my biggie.

I think to a certain extent, and in a different way, this is being done. The new alogarithm is supposed to take into account that CC useage has changes with the advent of many different reward cards, and people will now have a larger number of cards, all for different purposes. Hence the days when having 5 cards automatically meant someone was likely to get in financial difficulty are gone.

Boscoe wrote:

My changes would be:

4. Retain history of closed accounts forever, for the sole purpose of 'age of file'. If you open an account in 1987, close it in 1995 because you find a better card (lower int rate, better rewards, etc), closing the account should NOT hurt you. Don't report it on the credit report if you want, but keep the history in the credit file somewhere for purposes of calculating age of file.

This would, in my opinion, better predict risk than the current system.

Given a Gaussian distribution of scores, I think this would horribly bias the score towards older people, and make it MUCH harder to advance one's scores. It would give undue weight to age (both of accounts and people), and I think it might well be a worse predictor of risk

Re: If you could tweak the FICO score system

wmarat — Thu, 10 Jan 2008 19:25:14 GMT

Boscoe wrote:

My changes would be:

1. Allow one and only one AU to count, unless it can be somehow linked to a family member - then allow 2.   But don't give full credit for these.   Taking ALL AU's away as FICO 08 plans to will really tank alot of young people scores as well as spouse's who rely on their partner's cards. Agreed

2. Cap all negative reporting at 5 years, including all BK chapters, open collections, liens, etc. 5 years is enough of a penalty if the user cleans up their act. I would make it 15 years. Do not buy if you do not have money.

3. Allow 1 or 2 inquiries per year without dinging the score.   And, this is important, require all inquiries to state WHY the hard pull is occurring.   It is senseless to get your score lowered due to opening a checking account or other purpose that will never cause you to increase your debt. This is my biggie. I would allow up to 5 inq. for established credit users and up to 25 for new credit users.

4. Retain history of closed accounts forever, for the sole purpose of 'age of file'. If you open an account in 1987, close it in 1995 because you find a better card (lower int rate, better rewards, etc), closing the account should NOT hurt you.   Don't report it on the credit report if you want, but keep the history in the credit file somewhere for purposes of calculating age of file. Agreed

This would, in my opinion, better predict risk than the current system.

Re: If you could tweak the FICO score system

Anonymous — Thu, 10 Jan 2008 19:36:11 GMT

Boscoe wrote:

My changes would be:

2. Cap all negative reporting at 5 years, including all BK chapters, open collections, liens, etc. 5 years is enough of a penalty if the user cleans up their act. I would make it 15 years. Do not buy if you do not have money.

This would, in my opinion, better predict risk than the current system.

______________

The response to #2 is ridiculous. So, you miss a payment once and you suffer for it for life? That is an uninformed comment made by someone who must be living a sheltered life and only uses credit to buy bubble gum. Remember, this system is supposed to predict risk - not permanently punish people. There would be alot less credit being issued and the economy would probably suffer if this were enacted.

Responding to Midnightvoice and the response to #4 above -

Yes, it would allow older folks to have better scores, but to clarify, the system should not negatively affect scores simply because an old positive account was closed and age of file is reduced. A lower score would indicate increased credit risk - an assumption that is not backed up by any facts in this case.

Re: If you could tweak the FICO score system

Anonymous — Thu, 10 Jan 2008 19:41:42 GMT

The absolute #1 most ridiculous thing that affects your score is inquiries. That should be removed. Everybody claims to shop around for the best rate, but this requires multiple people to pull your credit. Last year I went shopping for a new home and a new car requiring tons of pulls on my credit. Especially for the car shopping. The dealership pulled my credit, then had 7 different banks pull my credit to try to find me the best rate. I have a total of 12 inquiries on my credit now. Having inquiries effect your credit is the dumbest idea ever and the only way I can see that being a reason is to lower your credit score in order to get lenders to charge you more.

Re: If you could tweak the FICO score system

wmarat — Thu, 10 Jan 2008 19:49:50 GMT

Boscoe wrote:
Boscoe wrote:

My changes would be:

1. Allow one and only one AU to count, unless it can be somehow linked to a family member - then allow 2.   But don't give full credit for these.   Taking ALL AU's away as FICO 08 plans to will really tank alot of young people scores as well as spouse's who rely on their partner's cards. Agreed

2. Cap all negative reporting at 5 years, including all BK chapters, open collections, liens, etc. 5 years is enough of a penalty if the user cleans up their act. I would make it 15 years. Do not buy if you do not have money.

3. Allow 1 or 2 inquiries per year without dinging the score.   And, this is important, require all inquiries to state WHY the hard pull is occurring.   It is senseless to get your score lowered due to opening a checking account or other purpose that will never cause you to increase your debt. This is my biggie. I would allow up to 5 inq. for established credit users and up to 25 for new credit users.

4. Retain history of closed accounts forever, for the sole purpose of 'age of file'. If you open an account in 1987, close it in 1995 because you find a better card (lower int rate, better rewards, etc), closing the account should NOT hurt you.   Don't report it on the credit report if you want, but keep the history in the credit file somewhere for purposes of calculating age of file. Agreed

This would, in my opinion, better predict risk than the current system.
______________

The response to #2 is ridiculous.    So, you miss a payment once and you suffer for it for life?   That is an uninformed comment made by someone who must be living a sheltered life and only uses credit to buy bubble gum.    Remember, this system is supposed to predict risk - not permanently punish people.    There would be alot less credit being issued and the economy would probably suffer if this were enacted.

1.No my dear ficofriend, those who are late on payments have sheltered life. I make my living working very hard, so I do not have such a luxury as late payments. I even do not agree to carry balances and pay ridiculous APR.
2. I have about 10 CC, around 40000 combimed credit and I spend monthly about 1500 on credit cards which is 60% of my monthly outflow.
3. Regarding uninformed. Please do not make assumptions, you never can know.

Responding to Midnightvoice and the response to #4 above -

Yes, it would allow older folks to have better scores, but to clarify, the system should not negatively affect scores simply because an old positive account was closed and age of file is reduced.   A lower score would indicate increased credit risk - an assumption that is not backed up by any facts in this case.

Re: If you could tweak the FICO score system

MidnightVoice — Thu, 10 Jan 2008 19:56:07 GMT

wmarat wrote:

Responding to Midnightvoice and the response to #4 above -

Yes, it would allow older folks to have better scores, but to clarify, the system should not negatively affect scores simply because an old positive account was closed and age of file is reduced. A lower score would indicate increased credit risk - an assumption that is not backed up by any facts in this case.

I am thinking of statistics not reallity!! If you keep all accounts on for ever, and there is a benefit to the score from the extra age, then statistically there has to be a loss for shorter ages.

If there is no benefit from keeping them on, then it is no different from now!

Re: If you could tweak the FICO score system

marty56 — Thu, 10 Jan 2008 23:12:25 GMT

No my dear ficofriend, those who are late on payments have sheltered life. I make my living working very hard, so I do not have such a luxury as late payments. I even do not agree to carry balances and pay ridiculous APR.

Of all the changes I wanted to make with FICO, they one that seemed the least controversial was trying to give relif to those who had late payment problems abreak if they were trying to get back on track. Many of the auto loan, mortgage companies and credit card companies seem to have an unwritten rule about a 24 month clean record. It seemed reasonable to me that my proposal to lower the time that lates remained on your CR to match what the industry was doing. This seemed like a win-win situation for the CCCs and the consumer.

wmarat's comment is interesting in that he judges people who have paid late yet complains about being judged.

Message Edited by marty56 on 01-10-2008 03:12 PM

Re: If you could tweak the FICO score system

Anonymous — Thu, 10 Jan 2008 23:19:48 GMT

Heeeeeeeeeeeeeeeeeeeeeeeeeeeey, let's play nice!

And remember, the FICO system is not about rewarding or punishing certain behavior. It's about predicting risk.

You don't get points for prompt payments for only 2 years because, according to the FICO formula, statistically it's not long enough to predict whether you can keep it up. A lender giving a 30-year mortgage has to find some way to predict the likelihood of your payment behavior over a long period of time.

Re: If you could tweak the FICO score system

marty56 — Thu, 10 Jan 2008 23:39:48 GMT

Of all they people here who have been late, took control of their credit cards, and got back on track, how many of them fell back into old ways after 2 years? after 5? after 7?

I still suspect the 7 year rule is more tradition then fact..

Re: If you could tweak the FICO score system

Anonymous — Thu, 10 Jan 2008 23:43:55 GMT

marty56 wrote:

Of all they people here who have been late, took control of their credit cards, and got back on track, how many of them fell back into old ways after 2 years? after 5? after 7?

I still suspect the 7 year rule is more tradition then fact..

Only the number crunchers at Fair Isaac know fer shur.

Re: If you could tweak the FICO score system

haulingthescoreup — Thu, 10 Jan 2008 23:47:21 GMT

I still think a quicker fade on paid lates. Of course, I'm not biased or anything!

Re: If you could tweak the FICO score system

marty56 — Fri, 11 Jan 2008 00:06:12 GMT

All the negative stuff will be off my CR now in less time then I was in DMP (4.5 years) so I think as soon as that happens, I will get as many cards as I can, max them all out and refuse to pay a dime back just to here the FICO guys go:

It was 7 years, we thought Marty was clean.

Texas has a Homestead exemption so that cant take my home as long as I pay the mortgage. Last time I was in debt, I racked up over 70K in debt. I think I can do better, say 100k this time.

I do get the stat stuff though. I have a degree in Math but I hated stats. Computer Programming - way better.

Re: If you could tweak the FICO score system

haulingthescoreup — Fri, 11 Jan 2008 01:24:02 GMT

Oh, poo, no you won't, you know you'll never let those reports get tarnished again!

They might call economics "the dismal science", but stats should be called "the wrist-slashing science."

Re: If you could tweak the FICO score system

marty56 — Fri, 11 Jan 2008 01:47:37 GMT

That is the whole point. Having good credit is mostly about making choices. Yes there are things that we cant predict (medical bills, car dies, kids,etc) but most of the time it is about making choices.

I choose to work hard on my credit, never to be late and try to PIF or at least have a firm date to PIF.

I didn't do this because of the lates being on my CR for 7 years. They could have been on for 2 minutes or 100 years for that matter. Yes my scores would all be over 760 if those lates werent on my report. I think I can get there even with them on it.

I wanted to be out of debt, to have good credit scores so I could get the credit I needed and to stay of of debt. I believe I can still get what I want with those lates still on my CR. Someday they will be off. In far less time then it took me to get into debt.

Re: If you could tweak the FICO score system

fused — Fri, 11 Jan 2008 21:10:07 GMT

5. Medical collections/accounts cant be reported unless it was done through an exension of credit

I respectfully disagree! Unless you pay at the time of service, all medical services rendered are an extension of credit. Why? The service is rendered and a bill is due. I don't understand why medical collections are sometimes treated differenly than any other collection by mortgage lenders