To pay your bills on time is not a favor to credit word, its an obligation. They don't see that behavior as amazing, only not as negative. However when you miss payments then that is a big red flag.
Having an Excellent credit score, dosen't mean you are special. It's mean you are doing what you suppose to do.
You are living in their word, not other way around.
Wrong with respect to what? A score model that didn't penalize properly for delinquency wouldn't be useful to lenders for underwriting, and so wouldn't be used in any case.
@AlgorithmIsWrong wrote:Prediction is pretty much an opinion in my eyes and peoples credit worthiness should not be judged based on an opinion. If one late payment hurts you by 20+ points when all your prior payments were on time, one would take into account all the positive history and slightly ding the person for a late payment. Key word there is "slightly." Now, if the late payments continue, then sure, I could understand the huge decline. This is why the system is flawed.
Perhaps, delayed reporting from agencies to the bureaus is warranted. Where a 3 to 6 month period is scored rather than individual months.
The score is a quick glance at likelihood to perform and is based on datapoints. As mentioned before, if they find a correlation between datapoints that is consistent across enough people, it can be assumed that it is a fairly accurate predictor of what can happen and factored into the algorithm.
Now, is it fair? I don't think so. I just finished a 7 year rebuild meaning I went 7 years since my last derogatory, but was penalized until the end. I also don't like the fact that paying my chargeoffs and collections still hurt me more than a bankruptcy. I fulfilled my obligations, people who filed bankruptcy did not. I didn't hit the 700s until about 5 years in, while some filing bankruptcy were able to do it in as early as 2 years. I was relegated to toy limits while people literally a week out of bankruptcy were able to get multi-thousand dollar limits from a lender they just burned. So I get what you're saying in regards to scoring us on the overall reporting versus a single incident. But that's not how it works. The score is based on a snapshot of your profile at that moment in time. The new trending scores will hopefully help in a situation like mine, showing I was paying everything down and off and scoring me appropriately for it.
Having said all that, the score is just a number and doesn't dictate likelihood of approval. Lenders will always use their own criteria for approvals. I've always been an outlier and able to get approved for things my scores say I shouldn't. It also goes the other way. Cap1 is not friendly to people with 800+ scores. I use it as just a guideline and to quickly verify nothing is wrong. If I see my score drop 30 points, I know there's something that needs my attention. Otherwise, I don't bother checking it before an app as the lender will either approve me, or they won't.
