Credit Bucket to Bucket

[haulingthescoreup]

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@Anonymous wrote:

I finally got a scorewatch update and my fico went down 3 points. My message indicated:

* You moved from one category of credit users to another as time passed. The good news is that moving between categories like this usually offers you the potential to reach a higher FICO score in the future.

My question is:

What kind of timeframe is the "future".

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The million dollar question! One we'd all like an answer to. My best guess comes from playing with the simulator for my EQ and TU scores. Things start to move at the 3 to 6 months marks, look good at one year, and have taken off at two years.

I don't think this necessarily means that it will take a whole year and the sproing, up go my scores (hope not, anyway.) When I look at my reports for what happens between six months and a year, I see inqs falling off, a bunch of lates going over 2 years, a couple of credit card anniversaries, etc. As best as I can tell, my scores should be back where they were (whoopee) in 3 months or so, climb steadily until sometime after 6 months, and then really pop. And if some of these GW's start working, then it will be sooner than that, as my only baddies are lates.

So this might be wishful thinking, but I'm looking at the sims as an indicator of how this will go. Not carved in stone, I know...

[Anonymous]

well make sure you owe something to someone or your score will go down..they really need to be regulated. that simulator is a crock.

Message Edited by casinoannie97 on 10-24-2007 08:53 AM

[RobertEG]

CRA scores are regulated, but ONLY by the requirement that the CRA discloses the raw score that they generate, and not by the need to show how they are generated.  Credit scoring models are totally proprietary trade secrets, not regulated by any rules. and generated by and for for the benefit of the lenders, and not the consumers.  They attempt to show their view of risk for the general, and not specific markets, when granting credit on any type of new or increased debt.  Disclosure of these scores to the consumer was not forced by the magnanimous concern of the credit bureaus.  It was forced by federal law under the FCRA. .  But only as it applies to generic scores, such as FICO.   FICO scoring is a generic model, not focused on any specific market.  Thus, FICO scores are used by mortgage and auto lenders, for example, only as general indicators , and they trim, modify, or consider FICO as only a part of their overall assessment of you as a “good” or “bad” risk, i.e., one that they will or will not extend credit to.  They look at other factors not even considered by FICO, such as income, debt to income, total payments on all debt, residential status, etc.  Additionally, mortgage and auto loans, for example, put up collateral in the event of default, and thus generally have lower risk to the lender than unsecured loans and revolving credit accounts.  Thus, FICO scores for these lenders are not the end-all in their credit grant or no grant decision.  They modify them for what they see as the risk for their specific type of credit or loan.  Makes sense.  However, revolving credit is unsecured, and thus the generic FICO scores, based primarily on overall payment history, are more meaningful to them in making decisions.  They rely upon them mainly because they are simple and fast, and don’t require a lot of additional scoring work on their part.

However, FICO modelers, while basically generic in overall view in order to produce their products as quickly and economically as possible, realize that comparing the risk of someone with only a short credit history and no baddies, for example, with someone who has a long credit history but with a few baddies that were, for example, over two years ago, is comparing apples with oranges.  Who is the greater risk?  They look at history of sub-groups to evaluate risk.  So the generic model is trimmed by trying to set up comparisons with those of generally similar credit history, and then looking at the risk of baddies that those with similar history have historically shown during the next two years after the grant of new credit.  They simply realize that comparing one to the entire population gives increasingly non-statistically valid risk analysis, so they don’t use one gigantic model for all consumers.  A plurality of separate, sub-generic models are used, which we call “buckets.”

Lenders see the logic of this, and buy (literally) into it.  While we consumers are infuriated when we move into a new sub-generic model that may drop our score, FICO scores are not generated for the glee of or logic to the consumer.  They are generated for risk analysis by the lenders.  That is their market.

Message Edited by RobertEG on 10-23-2007 11:14 PM

Message Edited by RobertEG on 10-23-2007 11:22 PM

[Anonymous]

Thank you Robert for the explanation. Very well put in understandable terms.

Good post.

[Anonymous]

well thanks robert.  my problem is being penalized for not owing any money (although this month will be different because i want to see what it does to my scores).  then they tell me to make a major purchase like house or car   hell i'm getting ready to retire--don't need house and car is paid for.   TU takes me from 720 to 708 and sends wamu 732.  I"m lost.  i don't think in six years i have changed buckets. i don't know.