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Credit score deflation

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Anonymous
Not applicable

Credit score deflation

Hello....This a general question. Not about me. You seen that there is 12% unemployment in the US. There are banks out there that want to lower someones' credit score because what is happening with the recession and convid 19. They are afraid someone will not pay their credit card bill. So the banks are going to lower the credit scores in general since today their is more risk for them. This happened in 2008 as well. Even if you pay $1.00 more than min. Banks computers look at it and think 'he is paying more than the min'. What does everyone think? Credit is not a hobby. Thank you.

Message 1 of 18
17 REPLIES 17
Eagered2succeed
Frequent Contributor

Re: Credit score deflation

I'm confused. Lowering score? That's impossbile for a lender to do rightfully. Guess you're referring to an internal score specifically with that FI?

Message 2 of 18
sarge12
Senior Contributor

Re: Credit score deflation


@Anonymous wrote:

Hello....This a general question. Not about me. You seen that there is 12% unemployment in the US. There are banks out there that want to lower someones' credit score because what is happening with the recession and convid 19. They are afraid someone will not pay their credit card bill. So the banks are going to lower the credit scores in general since today their is more risk for them. This happened in 2008 as well. Even if you pay $1.00 more than min. Banks computers look at it and think 'he is paying more than the min'. What does everyone think? Credit is not a hobby. Thank you.


Where did you read this? Please provide a link, because the banks do not set fico credit scores, so to the best of my knowledge can't lower fico scores. They can certainly apply the reports data to an independant internal credit score model, but not a fico score. The CRA applies the data in a report to the various fico models to arrive at their fico scores. Now banks often change what fico score is required for card approvals up or down to reduce risk. I do not buy this, fico and the 3 CRA's are not going to just change the fico 08 to make all scores drop. It is very likely that the fico 08 scores a bank requires to approve an app will increase, but not the actual fico 08 score.

TU fico08=812 07/16/23
EX fico08=809 07/16/23
EQ fico09=812 07/16/23
EX fico09=821 07/16/23
EQ fico bankcard08=832 07/16/23
TU Fico Bankcard 08=840 07/16/23
EQ NG1 fico=802 04/17/21
EQ Resilience index score=58 03/09/21
Unknown score from EX=784 used by Cap1 07/10/20
Message 3 of 18
Anonymous
Not applicable

Re: Credit score deflation

The only way banks can systematically lower credit scores is by reducing credit limits, which will increase utilization.

 

Even then, consumers can reduce balances to retain scores.

 

 

 

 

Message 4 of 18
sarge12
Senior Contributor

Re: Credit score deflation

OP...I also do not think the minimum payment is even on a credit report, so a bank would not even know you were paying 1 dollar over the minimum on other banks credit card accounts. It shows the highest ever balance, paid as agreed, and balance, but I don't think it shows minimum required payment info for each account which varies from 1 creditor to another. Each lender determines what the minimum payment will be.

TU fico08=812 07/16/23
EX fico08=809 07/16/23
EQ fico09=812 07/16/23
EX fico09=821 07/16/23
EQ fico bankcard08=832 07/16/23
TU Fico Bankcard 08=840 07/16/23
EQ NG1 fico=802 04/17/21
EQ Resilience index score=58 03/09/21
Unknown score from EX=784 used by Cap1 07/10/20
Message 5 of 18
Anonymous
Not applicable

Re: Credit score deflation

Senator Warren said: Senators Elizabeth Warren (D-MA) and Brian Schatz (D-HI) sent a letter to Equifax, Experian, and TransUnion, inquiring about the actions they are taking to make sure Americans’ credit isn’t damaged permanently if they have trouble paying their bills on time during the crisis.
“If American families and consumers are piled under a mountain of debt during this pandemic and once it ends, the country will struggle to emerge from a deep recession,” Warren and Schatz wrote. “This means that when the crisis is over, months of late or missed payments could add up to not just a mountain of debt, but a cratering credit score that takes away the shovel they might use to dig themselves out.” The 3 credit bureaus can lower your score because if risk and recession. You need to think like banks do.

Message 6 of 18
Brian_Earl_Spilner
Credit Mentor

Re: Credit score deflation


@Anonymous wrote:

Senator Warren said: Senators Elizabeth Warren (D-MA) and Brian Schatz (D-HI) sent a letter to Equifax, Experian, and TransUnion, inquiring about the actions they are taking to make sure Americans’ credit isn’t damaged permanently if they have trouble paying their bills on time during the crisis.
“If American families and consumers are piled under a mountain of debt during this pandemic and once it ends, the country will struggle to emerge from a deep recession,” Warren and Schatz wrote. “This means that when the crisis is over, months of late or missed payments could add up to not just a mountain of debt, but a cratering credit score that takes away the shovel they might use to dig themselves out.” The 3 credit bureaus can lower your score because if risk and recession. You need to think like banks do.


They can add additional algorithms that factor in things like industry and job title, if they wanted. A credit score is a quick measurement of risk. People in retail or food service are at a higher risk, so it would make sense that their score would lower. They probably won't do that because lenders already factor that information in.

    
Message 7 of 18
Anonymous
Not applicable

Re: Credit score deflation


@Anonymous wrote:

Senator Warren said: Senators Elizabeth Warren (D-MA) and Brian Schatz (D-HI) sent a letter to Equifax, Experian, and TransUnion, inquiring about the actions they are taking to make sure Americans’ credit isn’t damaged permanently if they have trouble paying their bills on time during the crisis.
“If American families and consumers are piled under a mountain of debt during this pandemic and once it ends, the country will struggle to emerge from a deep recession,” Warren and Schatz wrote. “This means that when the crisis is over, months of late or missed payments could add up to not just a mountain of debt, but a cratering credit score that takes away the shovel they might use to dig themselves out.” The 3 credit bureaus can lower your score because if risk and recession. You need to think like banks do.


No that's not what they're worried about. They're asking credit bureaus to not report late payments right now. The problem is still the consumer's creation by not paying their bills. 

They are annoyed because the provisions requiring CRAs to not report any negative info during this crisis were removed before passing the stimulus package. I'm certainly glad that's the case because they would have made scoring totally worthless. 

There is more to the article you read. Scroll it down. https://finance.yahoo.com/amphtml/news/coronavirus-credit-scores-171610990.html

Message 8 of 18
sarge12
Senior Contributor

Re: Credit score deflation


@Anonymous wrote:

Senator Warren said: Senators Elizabeth Warren (D-MA) and Brian Schatz (D-HI) sent a letter to Equifax, Experian, and TransUnion, inquiring about the actions they are taking to make sure Americans’ credit isn’t damaged permanently if they have trouble paying their bills on time during the crisis.
“If American families and consumers are piled under a mountain of debt during this pandemic and once it ends, the country will struggle to emerge from a deep recession,” Warren and Schatz wrote. “This means that when the crisis is over, months of late or missed payments could add up to not just a mountain of debt, but a cratering credit score that takes away the shovel they might use to dig themselves out.” The 3 credit bureaus can lower your score because if risk and recession. You need to think like banks do.


Scores will change if utilization increases, or payments are late even once, but the CRA's do not adjust their models to reflect a recession, the cardholders own credit behaviors due to a recession may change which will result in lower average scores. Credit limits might be changed by the banks, which would result in higher utilization and lower average scores. No way do I believe the CRA's are just looking at the economy and lowering scores to reduce risk. The risk might increase for higher scores, but I doubt that, and even 1 late payment can lower a score to increase the risk. The CARE act will allow some delinquincies to not lower scores by forebearance of the payment during the crisis, but they will not change the fico 08 model substantially to just lower everybodies scores. If true please provide a link to a reliable source, because this sounds like nonsense someone posted on social media.

TU fico08=812 07/16/23
EX fico08=809 07/16/23
EQ fico09=812 07/16/23
EX fico09=821 07/16/23
EQ fico bankcard08=832 07/16/23
TU Fico Bankcard 08=840 07/16/23
EQ NG1 fico=802 04/17/21
EQ Resilience index score=58 03/09/21
Unknown score from EX=784 used by Cap1 07/10/20
Message 9 of 18
Anonymous
Not applicable

Re: Credit score deflation

Actually, best to just read the letter that was actually sent. The article misses quite a bit more. 

https://www.scribd.com/document/458604596/2020-04-27-Letter-to-Experian-Re-Credit-Scores

Message 10 of 18
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