topic Re: Does anyone else feel shafted by FICO? in General Credit Topics

Does anyone else feel shafted by FICO?

myficomatt — Mon, 20 Jul 2009 17:39:01 GMT

Here's my reasoning. I feel as if the current system is flawed. When the economy was good and everyone was parking their Range Rovers in their 4 car garage on a house that they couldn't afford then everything was peachy. Now the economy is in shambles and everyone is paying the price. My credit is "okay" but not great. I defaulted on a $600 credit card when I was 19 but the scary thing about it is the fact that I wasn't even the risk compared to the other issues going on.

FICO, the organization that deems our "worthiness", bases their decisions on things like length of credit history, total available credit, utilization, etc. The credit card companies are trying everything possible to cut liabilities including credit line decreases and closing accounts. Here's my issue. Let's say a person in their 40s has an AMEX card that has been active for 20 years (I'm sure that's a likely scenario for many). AMEX decides now, 20 years later, that this person is a huge liability so they close their account. Now, not only does this faithful card member take a slash to their available credit but they've also lost 20 years of longevity. I think it's safe to say that an issue like that could sever a credit score. Maybe 50, 75, or even 100 points which could potentially snowball financial issues such as mortgages and auto loans.

I understand that there is an economic crisis. We're in a recession and times are tough for everyone but FICO needs an adjustment. The algorithm needs a complete revamping in my opinion. I'm not an economist nor am I a financial advisor. I'm simply someone trying to rebuild my "worthiness" and survive the turmoil. I decided to write this because I've consulted with this community for many of my own issues and have in effect, raised my "worthiness" significantly. I believe a 100 point increase in a year increase is not too shabby. So because of my greater understanding, I'm seeing the flaws. So my question is will consumers ever see a FICO makeover? Do any of you feel the same?

Re: Does anyone else feel shafted by FICO?

JoeBJay20 — Mon, 20 Jul 2009 18:03:50 GMT

What would you change about the algorithm?

Re: Does anyone else feel shafted by FICO?

DI — Mon, 20 Jul 2009 19:39:31 GMT

If one doesn't like the credit game they shouldn't play it. Don't apply for CC, Mortgage and Personal Loans.

Re: Does anyone else feel shafted by FICO?

Lel — Mon, 20 Jul 2009 19:58:25 GMT

myficomatt, there's a distinction that needs to be made between the (1) the Fair Isaac scoring algorithm and (2) what creditors do with the information.

The FICO scoring model has been tested and tweaked to generate a credit risk model that is used by many in the credit industry - credit card issuers, mortgage lenders, car finance companies, etc. The components of the formula and the weight given to each factor weren't decided in an arbitrary manner. They are included because this combination of factors generates a credit risk assessment that is validated and largely consistent across the population. Clearly, there are individual factors that play a role in whether or not you get a home or auto loan; that's why lenders look at more than your score when they review your mortgage application.

Your complaint seems to be more about how the scores are interpreted and used. Fair Isaac doesn't dictate this to the creditors. In the current economic environment, the creditors have chosen to be a lot more tight with their lending practices.

For example, if you look at the messages on the mortgage loans board from a year or two ago, you'll see that people are being told that they just need to get their scores above 580 to get a home loan. Now, people are told to get above 620. Was this because Fair Isaac told the lenders to shift their threshold? No.

Recently, I've had $19,999 of my credit limit slashed. My FICO scores are the same as they've been - maybe even a little higher. My loss of CL wasn't because of any problem with my FICO score.

You could look at the FICO scoring system and its use as something analogous to being graded on a curve. A professor might have decided that in the past, 80% on a test is good enough for an "A". But the next year, for the same test and the same distribution of scores, the professor might decide that you need 90% to get an "A". It's not an issue with the test, but in the way that the scores are interpreted.

Re: Does anyone else feel shafted by FICO?

myficomatt — Mon, 20 Jul 2009 21:46:27 GMT

@DI, "don't play the credit game" is easier said than done. how many people can actually afford to purchase homes and automobiles with cash? obviously, there are some things in life that you just have to deal with but that doesn't mean there aren't issues that need to be changed, ie. the government lol...

@Lel, I understand your comments and that's interesting to know that your credit score barely dropped after losing nearly $20,000 of credit. Certainly there are other variables which play a role such as the total amount before the CLD but it keeps me optimistic regardless. There is still the issue with length of credit history. If a card company cancels the account of a member of 20 years then that person will lose 20 years of credit and payment history which is weighted the most in the current system. Fair Isaac says this person is more of a risk (higher score) because of not enough credit length while the member's spending habits haven't changed and they aren't anymore of a liability as they were before the account was closed.

@J, I don't really know what I would change because I'm not a mathematician and certainly don't work in the finance area. In my amateur opinion, in these conditions, I would change the weight of the longevity factor. I would possibly add another option that allows the credit companies to select how an account was terminated. Basically, if the customer decided or the bank. I would possibly leave it on the record if it was done by the card company to cut their costs or if they bankrupted themselves. This way the person giving the loan would be able to see the reason for the lack of credit history and make a judgment themselves. I believe that would give consumer a fair chance.

Re: Does anyone else feel shafted by FICO?

JoeBJay20 — Mon, 20 Jul 2009 22:10:17 GMT

You don't lose credit history when an account closes. A positive tradeline will still be reported for 10 years after being closed, and still counts in your AAoA. As far as reasons for accounts being closed, a potential lender really isn't going to care why an account was closed, they will want to know if it paid on time, which can be determined just by examining the account history. The reports already list whether an account is closed by the customer or the lender. I'm really not understanding your complaint about the length of credit history, a person with a short credit history won't be in the same bucket with people with thick credit files. In reality, the FICO scoring system doesn't penalize you for having a short credit history, while at the same time it rewards you for establish a long history of credit management. This may be a hindrance with individual lenders, but that's not something in the control of FICO.

Re: Does anyone else feel shafted by FICO?

marty56 — Mon, 20 Jul 2009 22:46:32 GMT

@JoeBJay20 wrote:
You don't lose credit history when an account closes. A positive tradeline will still be reported for 10 years after being closed, and still counts in your AAoA. As far as reasons for accounts being closed, a potential lender really isn't going to care why an account was closed, they will want to know if it paid on time, which can be determined just by examining the account history. The reports already list whether an account is closed by the customer or the lender. I'm really not understanding your complaint about the length of credit history, a person with a short credit history won't be in the same bucket with people with thick credit files. In reality, the FICO scoring system doesn't penalize you for having a short credit history, while at the same time it rewards you for establish a long history of credit management. This may be a hindrance with individual lenders, but that's not something in the control of FICO.

Well said. I know people at work who are in their mid twenties who have 800 credit scores.

Also if you dont carry CC debt, that will make you AA proof or even if they do do AA on your, minmize the impact and you could always go after another CC if the need is there.

I take my chance with FICO rather than say a BofA CSR any day of the year,

Re: Does anyone else feel shafted by FICO?

DI — Mon, 20 Jul 2009 22:59:17 GMT

@marty56 wrote:
@JoeBJay20 wrote:
You don't lose credit history when an account closes. A positive tradeline will still be reported for 10 years after being closed, and still counts in your AAoA. As far as reasons for accounts being closed, a potential lender really isn't going to care why an account was closed, they will want to know if it paid on time, which can be determined just by examining the account history. The reports already list whether an account is closed by the customer or the lender. I'm really not understanding your complaint about the length of credit history, a person with a short credit history won't be in the same bucket with people with thick credit files. In reality, the FICO scoring system doesn't penalize you for having a short credit history, while at the same time it rewards you for establish a long history of credit management. This may be a hindrance with individual lenders, but that's not something in the control of FICO.

Well said. I know people at work who are in their mid twenties who have 800 credit scores.

Also if you dont carry CC debt, that will make you AA proof or even if they do do AA on your, minmize the impact and you could always go after another CC if the need is there.

I take my chance with FICO rather than say a BofA CSR any day of the year,

Do they have piggyback accounts the reason for the high scores?

Re: Does anyone else feel shafted by FICO?

marty56 — Tue, 21 Jul 2009 00:31:36 GMT

No they have 0 CC debt, a mortgage and good payment history of about 6 to 8 years.

Re: Does anyone else feel shafted by FICO?

Imhotrodcrazy — Tue, 21 Jul 2009 01:13:05 GMT

IMHO, all scoring, FICO, FAKO, etc, are worthless. It's a game of control over us. I know most of those on here will disagree with me, and that is fine. I still maintain, the less credit, the better. I will not let anyone, or anything, control me like others let themselves be controlled. At 67 yrs of age, it has worked fine for me.

Re: Does anyone else feel shafted by FICO?

smallfry — Tue, 21 Jul 2009 01:25:58 GMT

@Imhotrodcrazy wrote:
IMHO, all scoring, FICO, FAKO, etc, are worthless. It's a game of control over us. I know most of those on here will disagree with me, and that is fine. I still maintain, the less credit, the better. I will not let anyone, or anything, control me like others let themselves be controlled. At 67 yrs of age, it has worked fine for me.

They don't control me. I use my credit cards the way I used to use cash and checks. I always make sure I pay in full every month and never pay interest.

Re: Does anyone else feel shafted by FICO?

Imhotrodcrazy — Tue, 21 Jul 2009 01:31:14 GMT

@smallfry wrote:
They don't control me. I use my credit cards the way I used to use cash and checks. I always make sure I pay in full every month and never pay interest.

IMHO, IF you have and use cc's, you are under their control.

Re: Does anyone else feel shafted by FICO?

JoeBJay20 — Tue, 21 Jul 2009 01:50:08 GMT

@Imhotrodcrazy wrote:
@smallfry wrote:
They don't control me. I use my credit cards the way I used to use cash and checks. I always make sure I pay in full every month and never pay interest.
IMHO, IF you have and use cc's, you are under their control.

I respectfully disagree, it can actually be a mutually beneficial relationship. In many instances, using credit is actually a cheaper option than cash.

Re: Does anyone else feel shafted by FICO?

smallfry — Tue, 21 Jul 2009 02:09:36 GMT

@Imhotrodcrazy wrote:
@smallfry wrote:
They don't control me. I use my credit cards the way I used to use cash and checks. I always make sure I pay in full every month and never pay interest.
IMHO, IF you have and use cc's, you are under their control.

You are entitled to your opinion but your logic escapes me. I never worry about a bill going unpaid because a check is lost in the mail. I get an interest free loan though small when I use my cards for purchases. How am I under their control?

Re: Does anyone else feel shafted by FICO?

fused — Tue, 21 Jul 2009 02:14:12 GMT

I agree with JoeBJay and Smallfry. I don't pay interest and I "make" my CCs work for me. I earn frequent flyer miles for travel, cash back and points to buy Christmas gifts. I will NEVER let any CCC or bank enslave me again.

Re: Does anyone else feel shafted by FICO?

Imhotrodcrazy — Tue, 21 Jul 2009 02:53:52 GMT

@smallfry wrote:
How am I under their control?

I guess I failed in the attempt to make my point. Please forgive an old man. What I was trying to point out was, when you have/use a credit card, the "ccc" has you in control by way of giving you a cld, canceling your card or a number of other aa against a card holder anything they want to. This, in my eyes is very much control over a card holder. Again, we can agree, to disagree, each with the choice of choosing to have, or not have, a line of credit of any type. I am happy that I can choose not to have a line of credit since I am able to pay cash for anything that I want. My mortgage is all that I owe, which is purely used for tax reasons.

Re: Does anyone else feel shafted by FICO?

smallfry — Tue, 21 Jul 2009 03:05:55 GMT

@Imhotrodcrazy wrote:
@smallfry wrote:
How am I under their control?
I guess I failed in the attempt to make my point. Please forgive an old man. What I was trying to point out was, when you have/use a credit card, the "ccc" has you in control by way of giving you a cld, canceling your card or a number of other aa against a card holder anything they want to. This, in my eyes is very much control over a card holder. Again, we can agree, to disagree, each with the choice of choosing to have, or not have, a line of credit of any type. I am happy that I can choose not to have a line of credit since I am able to pay cash for anything that I want. My mortgage is all that I owe, which is purely used for tax reasons.

One old man to another. LOL. I see what you are saying. I never charge more than I can afford to pay back with the next paycheck. So they can CLD close me do whatever they want. I could live off one small card doesn't matter to me. Since there is a mortgage in my not too distant future I have to play the score game otherwise I could not care less.

Re: Does anyone else feel shafted by FICO?

JoeBJay20 — Tue, 21 Jul 2009 03:15:06 GMT

@Imhotrodcrazy wrote:
@smallfry wrote:
How am I under their control?
I guess I failed in the attempt to make my point. Please forgive an old man. What I was trying to point out was, when you have/use a credit card, the "ccc" has you in control by way of giving you a cld, canceling your card or a number of other aa against a card holder anything they want to. This, in my eyes is very much control over a card holder. Again, we can agree, to disagree, each with the choice of choosing to have, or not have, a line of credit of any type. I am happy that I can choose not to have a line of credit since I am able to pay cash for anything that I want. My mortgage is all that I owe, which is purely used for tax reasons.

Like anything else, it's control if you allow it to be or think it is. What you're doing with your mortgage is no different, it's a relationship that benefits you. For many of us, credit works the same way, and once you establish excellent credit, you always have the option of moving to a new creditor the moment the relationship ceases to be beneficial.

Re: Does anyone else feel shafted by FICO?

ECHOBOI4U — Sat, 25 Jul 2009 04:45:52 GMT

WE HAVE to play the credit game....to say otherwise is absurd to the least. To buy a home, to buy cars, to get a job nowdays, you must play the credit game in some way. Credit is a choice but our hands are forced to use it in some way. It really sucks that our lives (outside of who we really are) is determine by a stupid 3 digit number. Give me a break. I agree with the OP. My spouse has no baddies, low utilization and a good credit mix but cannot get above 685. I wish I could stomp the FICO indusry sometimes...I feel your pain.

Re: Does anyone else feel shafted by FICO?

marty56 — Sat, 25 Jul 2009 13:02:03 GMT

Each night I hear the mournfull cry of my Visa and Sams card telling me to buy that big screen TV, more DVDs and computer games.

Each time we go to Walmart and Sams, I hear the TVs and DVDs calling me to be their daddy and when I'm online, I find my self at Amazon.com , just one click away from that 55 inch Samsung LED TV and 2 seconds away from death by DW.

As a person who did almost everything wrong with CCs in the past, I use CCs for the sole purpose of building and mainatining a good FICO score and being able to get the credit I need.

I always PIF and early, sometimes the day after I use the card. Since I dont have a fully funded emergency fund, I may have to use credit someday for an emergency which I know isn't the best option but its better than not being able to do anything at all. I will have an exit plan if that day should ever arise in when it will be PIF.

I reject claims by people who say that you cant use CCs responsibly. I am and many others here are.