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Alternative data hasn’t displaced credit scores

Your FICO® Scores can impact your loan interest rates, terms, approvals and more.
Frequent Contributor

Alternative data hasn’t displaced credit scores

"In Russia, applicants can get loans based on answers to “psychometric” surveys that evaluate their verbal and arithmetical skills. Meanwhile, a study of a German e-commerce company’s transactions found people’s “digital footprints” — whether they use iPhones, have numbers in their email addresses or shop at night — can predict their risk of default."

 

Yes, credit scores still matter and here’s how much

27 FICO Scores + 3 VS3. MTG (Mortgage), AUT (Auto), and BKC (Bankcard) are scores 5,4, and 2 from the top.
Message 1 of 10
9 REPLIES 9
Senior Contributor

Re: Alternative data hasn’t displaced credit scores

So because I have insomnia, I am more likely to default on payment? Smiley Frustrated

 

I don’t have numbers in my email address and I use iPhone so 2/3 isn’t bad I guess. 

 

While I have complaints about the current scoring system, I think the new ones that generate a score for people who don’t use credit are a dangerous idea. Hopefully it doesn’t take off with too many lenders. 


Scores 1/2019:
Scores 7/2019:

Hover over my cards to see my limits!
Goal cards:
Message 2 of 10
Frequent Contributor

Re: Alternative data hasn’t displaced credit scores


@Saeren wrote:
While I have complaints about the current scoring system, I think the new ones that generate a score for people who don’t use credit are a dangerous idea. Hopefully it doesn’t take off with too many lenders. 

I know that is happening in the background already, it just has to be. I mean, Facebook has long been known to create shadow profiles for people that aren't even signed up for Facebook, but happen to be in the contacts list of people that are.

 

This is the future:

Here is your new FICO Score 11 report!
Score Rating: Poor


Negative score factors:
1. Your Twitter feed shows too much volatility and suggests hypertension.
2. You haven't called your mother in 2 years.

3. You bought a snuggie at 3am one night. Seriously?

27 FICO Scores + 3 VS3. MTG (Mortgage), AUT (Auto), and BKC (Bankcard) are scores 5,4, and 2 from the top.
Message 3 of 10
Senior Contributor

Re: Alternative data hasn’t displaced credit scores


@CassieCard wrote:

@Saeren wrote:
While I have complaints about the current scoring system, I think the new ones that generate a score for people who don’t use credit are a dangerous idea. Hopefully it doesn’t take off with too many lenders. 

I know that is happening in the background already, it just has to be. I mean, Facebook has long been known to create shadow profiles for people that aren't even signed up for Facebook, but happen to be in the contacts list of people that are.

 

This is the future:

Here is your new FICO Score 11 report!
Score Rating: Poor


Negative score factors:
1. Your Twitter feed shows too much volatility and suggests hypertension.
2. You haven't called your mother in 2 years.

3. You bought a snuggie at 3am one night. Seriously?


Lol I would be screwed. 

 

1) You use too much profanity

2) You are antisocial and ignore people on Facebook Messenger for weeks at a time

3) You have never called your mother

4) Past drunk posting history


Scores 1/2019:
Scores 7/2019:

Hover over my cards to see my limits!
Goal cards:
Message 4 of 10
Frequent Contributor

Re: Alternative data hasn’t displaced credit scores


@Saeren wrote:
Lol I would be screwed. 4) Past drunk posting history

Instant approval for the Bud Light Platinum Card! With a 4 case credit limit.

 

I know they can't resist collecting and reselling all the data that's out there, and that it will only get more invasive behind the scenes as time goes on, but they aren't going to get too picky with it when it comes to credit approval.

 

Step out of the credit game and consider it from a pure fiscally responsible, risk averse position: the smart thing to do would be to verify everyone's net income first, but that would mean a huge drop in approval rates. We already saw this happen when they were forced to do income verification for people under 21 due to the Credit Card Accountability and Responsibility Disclosure Act of 2009.

 

They need lots and lots of people who don't pay their statement balances in full each month. My prediction is that the 'alternative data' is going to be used primarily to bump up the interest rates those people pay - not to deny them a card in the first place.

 

27 FICO Scores + 3 VS3. MTG (Mortgage), AUT (Auto), and BKC (Bankcard) are scores 5,4, and 2 from the top.
Message 5 of 10
Valued Contributor

Re: Alternative data hasn’t displaced credit scores


@Saeren wrote:

@CassieCard wrote:

@Saeren wrote:
While I have complaints about the current scoring system, I think the new ones that generate a score for people who don’t use credit are a dangerous idea. Hopefully it doesn’t take off with too many lenders. 

I know that is happening in the background already, it just has to be. I mean, Facebook has long been known to create shadow profiles for people that aren't even signed up for Facebook, but happen to be in the contacts list of people that are.

 

This is the future:

Here is your new FICO Score 11 report!
Score Rating: Poor


Negative score factors:
1. Your Twitter feed shows too much volatility and suggests hypertension.
2. You haven't called your mother in 2 years.

3. You bought a snuggie at 3am one night. Seriously?


Lol I would be screwed. 

 

1) You use too much profanity

2) You are antisocial and ignore people on Facebook Messenger for weeks at a time

3) You have never called your mother

4) Past drunk posting history


Wait... are you me? haha




Garden goal: Completely clean reports and a gold spade (which, at my current rate, is never going to happen...)
Message 6 of 10
Frequent Contributor

Re: Alternative data hasn’t displaced credit scores

@CassieCard wrote:

"In Russia, applicants can get loans based on answers to “psychometric” surveys that evaluate their verbal and arithmetical skills. Meanwhile, a study of a German e-commerce company’s transactions found people’s “digital footprints” — whether they use iPhones, have numbers in their email addresses or shop at night — can predict their risk of default."

 

Yes, credit scores still matter and here’s how much


Great article.

 

I found it interesting that, "iPhone users are less likely to default than Android users, while those who have email numbers or shop late are more likely to default, according to the study."

 

I think that there's a simple explanation for this. Apple charges more for their phones than Google or Samsung. So, naturally, with higher priced items... you're going to get a group of consumers that have more wherewithal to pay their bills.

 

Also, Iphones have a very strict platform, whereas other phone platforms allow the user far more control. I think there's something to be said about people that are willing to conform to rules, when it comes to paying their bills. People that don't like rules are more likely to say, "screw this," and default. Of course, it could just as easily be predictive of the reverse outcome, whereas, users that are given more freedom - should inherently be more responsible.

 

Also, people that, "shop late," are either tweakers, or are on an irregular schedule; which is an indicator for lack of conformity.

 

As far as this whole big-brother evaluation trend is concerned, American Express has been doing it for years. To wit: American Express was once rumored to have a blacklist of merchants, (i.e. McDonalds, Walmart) that if they saw a card holder frequenting those low-class establishments... they would be brought up for financial review; because it indicated that they were in financial difficulty.

 

I think most banks have algorithms that identify financial distress, without necessarily singling out merchants. For example, if you put grocery, food, and fuel purchases on a credit card, and then proceed to carry the balance... that might be considered to be indicative of an impending financial hardship.

 

I used to think that using someone's personal social media accounts against them would be a low blow... but, when you think about it, people are just too stupid to exercise their own right to privacy. Instead they speak up and speak out about anything and everything... and prove how ignorant they are. Like the saying goes, better to be silent and thought a fool, than to open your mouth and remove all doubt. I don't feel sorry for them.

 

Come to think of it, if I were a bank CEO, I would use every bit of real world data that I could to evaluate people. If they hang out with people that have bad credit, than there's a good chance that some of that might rub off on them, as well. It's just the facts. Trends matter. Sure, there are those that can defy the odds and break free from a low-class existence, (which by the way, has little to do with money) but, in the end, a tiger cannot change its stripes.

 

Message 7 of 10
Established Contributor

Re: Alternative data hasn’t displaced credit scores

Interesting read
Starting Score: EX 641 TU 631 EQ 669
Current Score: EX 714 TU 718 EQ 713 (EQ9 735)
Goal Scores: 750


Take the myFICO Fitness Challenge




Message 8 of 10
Frequent Contributor

Re: Alternative data hasn’t displaced credit scores


@trusty wrote:

Also, people that, "shop late," are either tweakers, or are on an irregular schedule; which is an indicator for lack of conformity.

 Needed that laugh and didn't even know it. lol Thanks!

27 FICO Scores + 3 VS3. MTG (Mortgage), AUT (Auto), and BKC (Bankcard) are scores 5,4, and 2 from the top.
Message 9 of 10
Frequent Contributor

Re: Alternative data hasn’t displaced credit scores

One thing that gets missed in all this though is: read the fine print. Obviously, nobody with any sense would sign anything that waved all of their rights.

 

I was under the impression that such contracts were unenforceable; because you cannot wave someone else's rights en masse, certainly not by coercing them to sign a document that is not in their interests.

 

But, either way, even if the county clerks are asleep at the switch... the consumer has to be smarter than getting loans from loan sharks, and signing their life away, in the process.

 

When you add forgery and fraud to the shark end of that equation... this is how you end up in the poor house.

 

Still, someone needs to put a stop to this. It's nothing more than a RICO organization, in sheep's clothing... setup for the sole purpose of defrauding people.

Message 10 of 10