topic Re: Rebucketing? in Understanding FICO® Scoring

Rebucketing?

Anonymous — Fri, 15 Jun 2012 16:59:26 GMT

What is rebucketing? I don't understand.

Re: Rebucketing?

Duncanrr — Fri, 15 Jun 2012 18:45:07 GMT

My understanding is that as you increase (or hopefully not decrease) your scores you are bracketed/bucketed into a population of people with similar scores. For example you may be in the subprime group with people who have bad credit. As your score improves, you are removed from this population and normalized into another group of people you typically have higher scores than your last group. (think of it as going from JV to Varisty). As a result, your scores tend to take a hit as you are now compared to people that will typically have higher scores than you. The benefit is that in the new bucket your scores are supposed to normalize with the rest of the group in a quicker fashion. This results in quicker gains (and/or loses) to your scores.

Someone let me know if my understanding of this concept is off.

Duncan

Re: Rebucketing?

RobertEG — Fri, 15 Jun 2012 20:28:22 GMT

Good summary.

Each segment controls the weighting of paramenters used for your scoring. Thus, FICO is effectively not one, uniform scoring algorithm.

Re: Rebucketing?

Tuscani — Wed, 20 Jun 2012 21:01:51 GMT

The purpose of pools (aka scorecards, buckets, ect.) works out more to the benefit of those with derogs or very little to no history than it does them harm.

If there was only one simple bell curve including all credit files then those fortunate, extremely long established folks would have the whole top half of the score numbers scale absolutely locked up tight.

So where would that leave the person who is only beginning to build a credit history at all? Or who has had some derogs in the past but now is trying to work toward a better CR and score? They would be locked down into the basement of the score range for probably ten, twenty years or more. There's no WAY that that new user or rebuilder individual has as much good history yet as that long established individual does.

So what the pools are attempting to do is to help potential lenders figure out which of the new-credit individuals are showing characteristics which usually go on to blossom into a long clean history, and which other ones don't. The same for rebuilding individuals. By assigning relatively better scores to top of each scorecard and lower scores to the least improved, the individuals who are making progress float to the top. They actually are scoring a bit better than they would if being compared head to head with Mr. Jones who has no derogs whatsoever and has 30+ years of history already.

By trying to compare apples to apples and oranges to oranges, that means that amongst the pool of individuals who share certain key history elements, Customer A looks most like someone who will continue to do better and better and is not as likely to default whereas Customer B from the same group is not showing those indicators of steady improvement.

If it weren't for scorecards, IMO, it would be very difficult to get decent mortgages and accounts and loans without thirty years of history already established. That would mean that it would be like climbing an ice mountain barefoot to buy a house or a car or open a credit card before the age of at least forty or fifty.

The pools tend to be split out according to:

-Age of file (length of credit history)

-Thickness of file (number of trade lines)

-Presence of a new account (opened within past X months)

-Presence of seriously negative payment history (90+ days late, charge off, etc.)

Re: Rebucketing?

compassion101 — Thu, 21 Jun 2012 03:11:30 GMT

Great post Tuscani, I think I am closer to understanding that concept now!

So lets take, for instance, that 15% of the score is length of credit history, which is supposedly broken into AAoA and oldest account. So there is 82.5 points available for this section (850-300=550 points x .15%=82.5). If old guy has 30years oldest and 20 years avg, and young guy has 5 years oldest and 2 years avg, then young guy would automatically be losing alot of potential points, and not really have a shot at a good score, as he will lose let's say 60 points off the top as a guess, so that his best potential score with perfect payments and util etc would be 790. But instead they group oldest guy into a bucket with other older guys and compare him to them, and the younger guy is compared to younger guys? It makes some common sense, but it isn't fair if the old guy is at the very bottom of old guys and loses a tremendous amount of points because of it.

Perhaps the algorithms for FICO go deeper than dropping someone into a bucket, perhaps you are dipped into various buckets for various percentages of your points? Like, for instance, the old guy's 15% for length of credit history is broken into 5x3% sections and 3% is compared to all in the database, 3% compared to other old guys, 3% to others with more than 15 accounts, 3% to others with positive payment history, and 3% compared to others with newly opened accounts?Obv the numbers and buckets in this example are just made up out of thin air, but does the theory seem to be logically on base?

Re: Rebucketing?

solstice00 — Fri, 15 Mar 2013 04:50:38 GMT

Excellent thread.

I think we should make this into a sticky. A beautiful explanation and it helps all of us to understand more about FICO and its scoring algorithm and to have trust, patience and temperament while moving forward.

Re: Rebucketing?

MC15 — Fri, 15 Mar 2013 12:34:12 GMT

Agreed! Outstanding knowledge! I just got educated, thank you.

Re: Rebucketing?

Gunnar419 — Fri, 15 Mar 2013 12:58:03 GMT

@Tuscani wrote:
The purpose of pools (aka scorecards, buckets, ect.) works out more to the benefit of those with derogs or very little to no history than it does them harm.

Very informative, Tuscani! Thank you.

But why are we "graded on a curve" at all? It seems to me that other people's credit behavior should be irrelevant to our scores -- unless we personally let those other people into our credit lives. In the example you give, it woud be just as easy (and IMHO more fair) to grade a person according to his/her own improving behaviors and history, making adjustments for personal behaviors and improvements, not someone else's behaviors.

Re: Rebucketing?

sail — Sat, 06 Apr 2013 14:00:50 GMT

Is this what the message I just got in My Fico means:

"You moved from one category of credit users to another as time passed. For example, you may have transitioned from the category "consumers with a new credit history" to the category "consumers with a two- to five-year credit history". As a result, your credit report is evaluated differently, causing a slight change in your score. The good news is that moving between categories like this usually offers you the potential to reach a higher FICO® score in the future"

I moved from 796 to 722 in one night. Also my American Express just gave me a limit on my credit card that had never had a limit. I have worked hard on my making sure that my credit score stayed in a favorable range and I'm quite distressed by this change. I do not understand this message and that gets me more upset. I did just need to lease a car and I expected that to hit me a bit but a 75 point drop was not expected. Please explain this to me.

Re: Rebucketing?

poldies4 — Sat, 06 Apr 2013 14:30:39 GMT

I just got the same message this week and dropped 30 points! From what I understand, though, it's a good thing long term. My score had maxed around 740 - I'm hoping in this new bucket that my score will eventually go higher. My only negatives are high credit card balances (literally nothing else). I got rebucketed *I think* because I've been agressively paying down debt and I went from 16 years 5 months history to 16 years 6 months. Those are the only changes to my reports.

Re: Rebucketing?

lg8302ch — Sat, 06 Apr 2013 14:51:20 GMT

wonder if the oldest card is taken for bucketing or the AAoA? I do seam to get stuck at 793 no matter what I do. my oldest card is 26 yrs but the next one 22 months and all the others only 4 months now. 793 was with two cards and AAoA 18 yrs. trying to garden my 7 cards with AAoA of 7 yrs now and see if this will get me further....no badies, no mortgage, no installments but only revolving accounts. I know Fico does not like the mix and also did not like only 2 accounts. what do you think are more accounts with 5 x CL and still like 1% util getting me further with patience? of couse now Fico does not like the too many inq and too many new accounts. But this will get better in 2 yrs. what do you think my chances are to get over the 793? thks for your advice

Re: Rebucketing?

Anonymous — Thu, 18 Apr 2013 03:14:23 GMT

"I got rebucketed and the 50 point drop pushed me into a subprime mortgage, costing me an extra $30,000 in interest over the next 15 years"

Re: Rebucketing?

dddewdrop — Thu, 18 Apr 2013 13:55:53 GMT

Rebucketing otherwise known as switching scorecards has more to do with being categorized by different content of your report than by different score. One of the most common examples used is that people with a bankruptcy on their reports are grouped on a different scorecard than people without bankrupcies. Also people with long credit histories have a different scorecard than say a college student applying for a first card. Look for rebucketing when something dramatic happens to change the content of your report. Also look for it when your oldest card or tradeline hits a certain age... say 4 years. Scorecards have been know as part of the model for a while. Here is an article from 2009:

http://www.bankrate.com/finance/credit-cards/how-scorecards-affect-credit-scores.aspx

Re: Rebucketing?

Anonymous — Sun, 21 Apr 2013 01:24:29 GMT

Thanks for the link.

Re: Rebucketing?

algorithmslave — Sun, 21 Apr 2013 17:18:01 GMT

So let me get this straight.....one climbs to the bucket with 726 peeps and is welcomed with a boot in the face?

Re: Rebucketing?

Anonymous — Sun, 21 Apr 2013 22:06:08 GMT

Sure seems that way....

Re: Rebucketing?

Anonymous — Tue, 23 Apr 2013 00:13:40 GMT

My Fico score just dropped 35 points just because I was moved into the 2-5 year group. I understand the logic behind the grouping but I dont understand the huge decrease. This came at the worst time because I was planning on making my first home purchase.

Re: Rebucketing?

Anonymous — Tue, 23 Apr 2013 07:27:06 GMT

In a good bucketing system, every score in a higher bucket would be higher than every score in a lower bucket. That doesn't contradict the idea of grading on a curve. In fact, a good curve requires it. I'm confident FICO will eventually work out the bugs and make the curve smooth and consistent.

Re: Rebucketing?

Anonymous — Tue, 23 Apr 2013 08:29:29 GMT

So...these "buckets", is this the same as "tiers" or are tiers purely a function of score alone? Also, do lenders know that you are in group A or B, etc... and take that into account or again, only consider the score alone?

*Edit- I do realize other factors are taken into account by lenders, income, job history, etc...Just asking pertaining to the "buckets".

Re: Rebucketing?

Anonymous — Tue, 23 Apr 2013 09:02:56 GMT

There are so many technical terms and situations everybody forgets this system is for people to fail that is how they make money! I was not educated before I knew what a credit score was until I had bad credit! They designed this system for you to get bad credit sooner or later so by trying to explain what they are looking for they don't know or care as long as they are making MONEY! on all their credit card system.People all of this is about who gets richest the fastest and keeps the toys they bought! grow up and smell the coffee!!!!!!!!!MONEY,MONEY I still think the public school system should give children a introductory information to your credit score and credit bureau's the basics to let people know how important it is becoming to keep a decent score for JOB<RENT<HOMES<STORE Credit cards this is a business a information brokerage people make money on peoples info look on the internet on how many people give their E-mail and name to receive something as a gift or bonusesWAKE UP AMERICA! IT IS TIME TO STAND UP FOR YOU AND YOUR FAMILY INSTEAD BEING LEAD AROUND BY THE GOVERNMENT!!!!!! Too much government is where the deficit is failing not the economy !!!!!!!! Hell it is scary out there Free Speech it will cost you and me and everbody look now how much!!!! Trillions and it has not stopped when they raise taxes means more defict! We don't get a break but we are bailing out companies we don't do business with! No one is giving us a cut rate but we pay. We even pay for countries that want to go to war with us what is up with that?????????????????????????????????????????????? Start giving a damn stand up now or lay down for ever.