topic Re: Unfair lowering of credit score in Understanding FICO® Scoring

Unfair lowering of credit score

Anonymous — Tue, 27 Jan 2009 22:48:34 GMT

Circuit City goes out of business and closed my credit card account. Account was in good standing, always paid on time. Never late.

I get a notice from score watch that my score went down four points because the account was closed.

I don't think this is fair. I didn't do anything wrong. It doesn't make me any less credit worthy.

Why should my credit score go down? What gives?

Re: Unfair lowering of credit score

MidnightVoice — Tue, 27 Jan 2009 22:55:22 GMT

4 points is really no big deal. This sort of thing is happening all over at the moment

Re: Unfair lowering of credit score

Anonymous — Tue, 27 Jan 2009 22:56:34 GMT

4 points is almost nothing, unless your score was on a border of another credit grouping you have little to worry about. I wouldn't worry about it as the age will count on your report for 10 years. If you don't have another store or gas card open you may want to consider opening an account you will use. The 4 points perhaps came from lost credit mix. If you have another store or gas card your point loss was likely unrelated to the account being closed, it likely stemmed from a difference in utility, total credit age, or accounts with balances reporting.

Re: Unfair lowering of credit score

hopeagain — Wed, 28 Jan 2009 00:56:36 GMT

There are several things that seem counterintuitive when it comes to credit scoring. Who would've thought paying a judgment would lower a score?

Re: Unfair lowering of credit score

RobertEG — Wed, 28 Jan 2009 07:55:24 GMT

CharlieHorse, I understand your logic. But credit scoring is not about FairLogic, it is about FairIsaac. It is about future debt repayment risk analysis. What the FICO model now sees is an account that you can no longer draw upon for credit, and that you can no longer use to show a continued pattern of future timely payment history. So they need to focus on your use of other accounts to show your continued future payment risk.

The account, even though closed, still counts in your average age of accounts for FICO scoring, and is also reviewable in its prior payment history for a potential future creditor upon a manual review of your credit history.

So it is not a total loss.

That is just the way credit risk analysis works.

Re: Unfair lowering of credit score

Anonymous — Wed, 28 Jan 2009 13:30:28 GMT

So how does Circuit City going out of business effect MY future debt repayment risk analysis?

It has NOTHING to do with ME. I didn't do ANYTHING to cause this account to close.

I can understand that when an account is closed because it is a risk (actual history) it would affect your score.

I think the scoring formula needs to be changed especially in light of the current financial crunch.

Many banks are lowering credit access because of THEIR SITUATION. It should NOT EFFECT MY SCORE.

FAIR is FAIR - it has nothing to do with Isaac. Did you see the story today on Good Morning America?

We, as the PEOPLE need ORGANIZE so we can change what is wrong - so that it serves the MAJORITY.

That would be FAIR.

Re: Unfair lowering of credit score

MidnightVoice — Wed, 28 Jan 2009 13:52:10 GMT

A couple of points.

It takes years to change the risk model and get lenders to accept the new model.

We are NOT the customers Fair Isaac is servicing - the lenders are their customers.

There is fair, then there is legal

Also, it is a statistical model, so there will always be people treated worse than they should really be by the model.

Re: Unfair lowering of credit score

Scamp — Wed, 28 Jan 2009 13:59:09 GMT

CharlieHorse wrote:
Circuit City goes out of business and closed my credit card account. Account was in good standing, always paid on time. Never late.

I get a notice from score watch that my score went down four points because the account was closed.

I don't think this is fair. I didn't do anything wrong. It doesn't make me any less credit worthy.

Why should my credit score go down? What gives?

Most likely, this small score drop is due to your reduced available credit vs. (reported) debt. In that sense, the scoring algorithm does see you as less credit-worthy, because that ratio has worsened with the closing of the Circuit City card.

Re: Unfair lowering of credit score

Anonymous — Wed, 28 Jan 2009 18:30:09 GMT

@Scamp wrote:
Most likely, this small score drop is due to your reduced available credit vs. (reported) debt. In that sense, the scoring algorithm does see you as less credit-worthy, because that ratio has worsened with the closing of the Circuit City card.

And if this is the case, I think you could fix it by reducing your balances on your other cards or increasing credit limit on other existing cards so the percentage credit used was restored.