@Anonymous wrote:
Large financial institutions have their own proprietary scoring system based on your spending patterns, payment history and etc with them. As well, the information on your CR will be factored into the "proprietary score." It might be different with small local banks and CU's.
First, to answer the above post: AR = Account Review, which means that an existing creditor will review your credit periodically to determine if you continue to meet credit standards and to analyze your "current' risk level to them.
Hoever, whether large institutions have proprietary risk management models or not has nothing to do with the CRA's. FICO or other CRA scoring systems are the methods by which lenders and CRA's can discuss risk.
For example, if a lender seeks PROMO lists from a CRA, it will be based upon a selection of consumers in the CRA database which meet certain credit criteria....and this is most often certain "score" levels. This is the tier 1 sifting of "potential" borrowers. It in no way preapproves, but at least makes the list smaller and more targeted.
Sometimes these PROMO lists will be further segmented, based upon HAVING a current mortgage, plus a certain score. Afterall, homeowners are more desirable than non-owners.
FICO, vantage, plus, etc. are merely ways that the CRA can communicate the "overall risk tendancies" or "category" that a consumer best fits. From that point, the lender makes there own determinations based upon whatever internal criteria they may elect. Some will be further risk scoring based upon actual content. Some will be based upon specific CR content, such as BK, which may entirely disqualify a consumer regardless of all other factors or scoring (this is common with some prime lenders).
The point I am making is that the CCC or lender doesn't want to internally analyze EVERY CR the CRA has. They want a select list, and this is generally created by a FICO or CRA scoring system that the lender understands the "threshholds" and possibly additional specific criteria, such as "exclusion" of certain elements such as BK, or specifically "include" certain elements such as "active mortgage/real estate loan."
This is why when you get a denial letter, they tell you whom they obtained credit info from, but also state that the CRA played no role in the final credit /loan decision .
Scores are not really a grading system as much as a "segmentation" system to classify or categorize consumer CR's based upon risk. One lenders trash is another lenders treasure....so score is very subjective and is only a tool of segmentation and identification of the ideal consumer.
Message Edited by txjohn on 12-27-2009 01:53 PM
