Inequities in the FICO system

[RobertEG]

I agree with many points made by the OP.  There is no question, in my opinion, that there are inequities in the credit scoring system.

Lack of complete consumer information is clearly a very valid issue.

However, lack of reporting of information that might help one's score is not something over which either Fair Isaac the CRAs, or even creditors have control.

On the flip side, deletion of accurate information is often done, even though not in the interest of integrity of complete histories and accurare score comparisons.

Creditors are not required to report to CRAs.  Even some who might wish to do so must first pass scrutiny with the CRAs, such as their size and ability to implement the required Metro 2 reporting format.  They must enter into a reporting agreement, and pay to report.

FICO cannot score what is not in a CRA file.

Those who do report are not required to report all information, they are barred only from reporting information that is knowingly inaccurate.

All monthly delinquencies, charge-offs, collections public records, etc., do not get reported or included in consumer files.

Consumers also bear some ot the "fault" by seeking deletion of accurate history that is harmful to scoring and of value to other creditors.  The value of credit reports is diminished when information is subjectively deleted based on PFD and GW acceptance.  The CRAs have written policy discouraging such deletions, but yet they are routine with many furnishers.

Creditors subjectively delete entire credit histories, which can either hurt or help cosumer scoring.

CRAs selectively purge old accounts after aprox. 10'ish years, only to serve their interest, kowing it impacts consumer AAoA.

The list goes on and on.....

In a ideal world, all consumer history would be reported, and no accurate info would be deleted.

In the real world, some parties cannot or do not report, while others seek deletion if in their interest.

The only way around it might be an ObamaCreditReportingCare mandated system.

I shudder at the prospect.......

[VirusCredit13]

It's a credit report not a bill report. Just because you get a monthly bill with a cell phone does not make it the same as a credit bill. If you should get credit for paying a $10 a month cell phone bill, why not get credit for buying a $120 prepaid phone in a store? Neither situation they are issuing credit, it's just a charge for a service. Just because you pay at end of month doesn't make it credit, otherwise eating at a restaurant and paying at end of meal would be considered same thing. As far as I know cellphones won't report 30-day lates, they only report if you default and/or they have to send it to a CA. I could owe the dentist or doctor some money, even a one time fee, and they aren't reporting if I pay it to them, but if I don't it will go to CA and it will be reported.

[RobertEG]

Consumer reports are not limited only to credit extended to a consumer.

As stated in section 603(d):

"The term "consumer report" means any written, oral or other commumication of any information by a consumer reporting agency bearing ono a consumer's credit worthiness credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's elegibility for

(A) credit or insurance to be used primarily for personal, family, or houshold purposes;

(B) employment purposes; or

(C) any other purpose authorized under section 604."

Section 604, which is the section defining permssible purposes to pull a consumer's report, explicitly includes business transactions for which their is reasonable basis to review a consumer's credit standing, regardless of whether the business transaction involves extension of credit. 

The types of information bearing on a consumer is extremely broad, and includes information other than simple past use of credit.  It extends to information that could be used in evaluation of any of the stated purposes.

Debt can arise in many ways other than based on extension of credit.  The primary reason many parties, such as your local dentist, dont report  delinquencies is that they dont have credit reporting agreements with the CRAs.

[blondy250]

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@hwturner17 wrote:

The FICO system is a little backwards in my mind for so many reasons. One little thing in particular that really bugs me is the fact that rental companies, utilities and cell phone companies pull credit when you open an account and report to the bureaus if you don't pay them, but if you do pay them on time on a regular basis you get nothing.

To be clear, I fully think anyone who doesn't pay their bills should face the consequences but I also think that if you do pay on time, you should get credit for it as well.

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Your supposed to pay your bills on time, why should you get credit for it.