The whole credit score model is 'ridiculous'

[Revelate]

---

@iv wrote:

The big gaps that we're still missing are:

Daily free Experian reports and free lock/unlock (hopefully they'll start matching EQ/TU on that soon)

Free Equifax FICO 8 scores (oddly unpopular with CC issuers for their free monthly scores)

Free "mortgage" FICO scores (at least there are multiple paid sources now - fairly recently these were impossible without a "real" pull)

---

DCU and NASAFCU both offered mortgage scores up until recently for their members; DCU still does for EQ, I heard NASA may have switched.  PSECU may still offer EX v2 as they were many years ago but they restricted their membership and no idea if they still do.  

TU 04 was the one which is incredibly hard to find; used to be able to do a LC pre-approval and get it, but they switched to FICO 8 too.

I'm not really that concerned about scores even if they're a hobby of mine and I do need to optmize my mortgage scores better and before I move after taking a non-trivial dip on EQ FICO 5 below the maximum UW tier, but such is life in FICO land.

[Anonymous]

---

@Revelate wrote:

Net worth has little to do with one's behavior with regards to loan or credit card repayments.

Article didn't really mention anything else: it might not be a perfect system but there's a lot of data standing behind it.

---

I would guess you are wrong on this.  American Express asks net worth on applications and they have lowest charge off rate.   While you will have your professional athlete who spend 100 million dollars in a couple of years, people with normal jobs who accumulate wealth are going to much more likely to pay back debt.  If you have a million dollars in savings you aren't going to default on a credit card with a 25k limit.

[Anonymous]

---

@iv wrote:

---

@Anonymous wrote:

My primary beef with the current system is that it is still relatively difficult to obtain accurate, complete, credit reports on a timely basis.  I don't feel that paying $30/mo to services like MyFICO is anywhere near reasonable for the average person.  And sitting here waiting for the quarterly dribble of info my $30($90/qtr) provides is pretty pathetic.  I choose to do so, during my rebuilding, but it's absurd that it should cost that much to access this information.  There is no reason why CRA's can't provide access to this information to consumers in real-time, for free.  If not, allow me to opt out of your ability to hold my personal financial information.  It is a priviledge that they have access to this information.  They should start acting like it.  

---

I strongly agree... real-time, on demand access to both (truly full) reports and scoring should be freely available to all consumers.

But we're actually much closer to that now than ever before:

Equifax directly supplies daily report pulls for free to everyone (on trustedid.com, sign up for free at equifaxsecurity2017.com). Also appears to offer a lock/unlock service for free.

Transunion directly supplies daily report pulls for free to everyone (on trueidentity.com, sign up for the free membership). Also appears to offer a lock/unlock service for free.

Experian directly supplies monthly reports with FICO 8 scores for free to everyone (on experian.com, with free signups scattered across a bunch of Experian-owned sites and apps).

When you include the many CC lenders that offer FICO 8 TU/EX scores (to customers or even to the general public, like Discover's creditscorecard.com), most needs are actually covered fairly well - this is amazing progress since 2013-2014 or so.

The big gaps that we're still missing are:

Daily free Experian reports and free lock/unlock (hopefully they'll start matching EQ/TU on that soon)

Free Equifax FICO 8 scores (oddly unpopular with CC issuers for their free monthly scores)

Free "mortgage" FICO scores (at least there are multiple paid sources now - fairly recently these were impossible without a "real" pull)

---

I think the other missing piece is full inquiry transparency. I deserve to know EVERYONE that receives my credit history whether it’s a hard or soft inquiry. In a perfect world, you should be able to sign up at each CRA to access your FULL report whenever you want and receive notifications every time your report is accessed or changed. Sure MyFICO can charge for the scores, but if that’s all they’re providing it shouldn’t be $30+ per month. The vast majority of their income is derived from commercial access to scoring anyway, I’d assume. 

[iv]

---

@Anonymous wrote:

I think the other missing piece is full inquiry transparency. I deserve to know EVERYONE that receives my credit history whether it’s a hard or soft inquiry. In a perfect world, you should be able to sign up at each CRA to access your FULL report whenever you want and receive notifications every time your report is accessed or changed. 

---

Full reports, period.  In their "native" formats, with the full details that are frequently glossed over or completely hidden by the "user friendly" consumer report analysis tools.

Let notifications and analysis be paid add-ons.  But the raw data stored about each consumer should be available on demand (at least daily, if not truly realtime).

Personally, I think that scores should also be available on-demand - if a score is available to a third-party, it should be available to the consumer.  Free? That'd be nice, but is a bit harder to justify (as either a mandate or an agreed best-practice), as scores are effectively automated analysis of the raw data, rather than direct information about the consumer.

---

@Anonymous wrote:

Sure MyFICO can charge for the scores, but if that’s all they’re providing it shouldn’t be $30+ per month. The vast majority of their income is derived from commercial access to scoring anyway, I’d assume. 

---

You might be surprised... direct sales to consumers of credit reports/scores/etc are becoming a massive market.

For most of us (outliers with 100s of cards perhaps excluded...), our lenders aren't collectively spending $30+/month each to check our credit data/scores. Those of us who choose to subscribe to one or more of the various paid monitoring options are far more profitable on a per-file basis...

For example - all of FICO's corporate "Scores" segment (which includes "our business-to-business scoring solutions and services, our business-to consumer scoring solutions and services including myFICO® solutions for consumers, and associated professional services" - ie: all raw score delivery, both via myFICO, and to lenders without additional software or decision management tools only makes about $60M a quarter in revenue.  It would take less than 700,000 $30/month subscribers to match ALL of the "Scores" segment revenue. (That's only about a fifth of a percent of the current US population.)

Of course, raw score delivery isn't everything - that's only about a quarter of revenue, anyway.  It's the additional tools and analytics that make most of their money, and all of that is just to lenders.

But direct consumer sales are a rapidly growing share of revenue (for the CRAs, FICO, and various third-parties), probably too juicy to just "give up" for full and free consumer access.

You may find FICO's investor relations documents interesting:

http://phx.corporate-ir.net/phoenix.zhtml?c=67528&p=irol-irhome

[Revelate]

---

@Anonymous wrote:

---

@Revelate wrote:

Net worth has little to do with one's behavior with regards to loan or credit card repayments.

Article didn't really mention anything else: it might not be a perfect system but there's a lot of data standing behind it.

---

I would guess you are wrong on this.  American Express asks net worth on applications and they have lowest charge off rate.   While you will have your professional athlete who spend 100 million dollars in a couple of years, people with normal jobs who accumulate wealth are going to much more likely to pay back debt.  If you have a million dollars in savings you aren't going to default on a credit card with a 25k limit.

---

On the flipside the two near billionaires I've met had worse credit scores than I did even when I was still batting 640.

I think there's very little correlation between credit score and income / assets, but it's just anecdotal evidence and I could be wrong.

Also a CO is an accounting entry where the creditor has decided they're not likely to get it back... so if you are chasing someone with assets, you don't charge it off typically.  I'm not really surprised by the Amex data as a result nor do I read that much into it TBH.

[Thomas_Thumb]

^ Agreed

The elite don't need good credit. it's all about influence and leverage to extract revenue to further financial gains. Some are rather adept at extracting "management fees" from company entities and sheltering income before declaring bankruptcy.

[marty56]

Back in my credit dark days I felt that way.  These days I say FICO is great.  It's all a matter of prospective (FICO score) and being somewhat hypocritical like I am.

[Anonymous]

Rich people don't worry about credit scores. They have the ability to payoff any debt whenever they choose because they have lots of regular income available.

[Anonymous]

---

@Anonymous wrote:

Rich people don't worry about credit scores. They have the ability to payoff any debt whenever they choose because they have lots of regular income available.

---

That's not true at all.  While I don't consider myself "rich" I have always had a very high income but it wasn't until the past decade that I lived within my means.

The year that I destroyed my FICO scores from nearly 800 down to low 500 I earned over $250,000...but I had a divorce AND my paychecks stopped for 4 months.  I had no savings.  My insurance rates skyrocketed the next time my rates were calculated.

The second time I destroyed my FICO scores from mid-700s down to low 500 (or worse) I earned a little under that...but I had a business partner hit the bottle and watched a profitable business totally collapse because I didn't have enough credit or cash to save it.  Happened in slow motion but over 4 months.

My insurance rates for many years were crazy high, and I thought about FICO constantly.

Now I'm smarter because I have an emergency fund, but that's not just for rich people.  One of my best friends makes $25,000 a year and has for all her adult life, and her emergency fund is over $60,000 -- which is more than almost all of my "rich" friends.

SMART RESPONSIBLE people have the ability to pay off any debt whenever they choose because they have lots of emergency savings available and live within their means. Rich does not mean smart and responsible.

[Gunnar419]

---

@Revelate wrote:

---

@Anonymous wrote:

---

@Revelate wrote:

Net worth has little to do with one's behavior with regards to loan or credit card repayments.

Article didn't really mention anything else: it might not be a perfect system but there's a lot of data standing behind it.

---

I would guess you are wrong on this.  American Express asks net worth on applications and they have lowest charge off rate.   While you will have your professional athlete who spend 100 million dollars in a couple of years, people with normal jobs who accumulate wealth are going to much more likely to pay back debt.  If you have a million dollars in savings you aren't going to default on a credit card with a 25k limit.

---

On the flipside the two near billionaires I've met had worse credit scores than I did even when I was still batting 640.

I think there's very little correlation between credit score and income / assets, but it's just anecdotal evidence and I could be wrong.

Also a CO is an accounting entry where the creditor has decided they're not likely to get it back... so if you are chasing someone with assets, you don't charge it off typically.  I'm not really surprised by the Amex data as a result nor do I read that much into it TBH.

---

I agree with Revelate. I've known many poor but honest people who pay their bills religiously. I am one of them. I worked hard to earn my 800+ scores and earn them i did.

I have also been around a number of real hot shots in my life, including a few who made it onto Forbes lists, who scorned keeping financial commitments. Paying bills and keeping commitments was to them something only stupid middle class people did. They got away with it because merchants and banks are ALWAYS willing to take gambles on rich people, as generations of aristocrats have learned.

I've also known many middle class people with good incomes and assets who had trouble paying their bills because they were so desperate to keep up with the Joneses, something my poor but frugal counterparts don't do.

Yes, it's just anecdotal, but in this one case I know from experience that the FICO algorithms are correct. Otherwise I do think they've got a lot of flaws and need revamping, but I don't think the original article made a very good case for that argument.