Entire Credit Score and Scoring System

[Abby4]

IMO the entire credit score and scoring industry needs a complete over haul............Who oversees this industry?

[FireMedic1]

https://www.ftc.gov/legal-library/browse/statutes/fair-credit-reporting-act 

[Anonymalous]

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@Abby4 wrote:

IMO the entire credit score and scoring industry needs a complete over haul............Who oversees this industry?

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If you want to overhaul the premises of the entire industry, you'll need to get the legislators involved.

The most recent attempt:

https://www.congress.gov/bill/118th-congress/house-bill/3881

https://www.congress.gov/bill/118th-congress/senate-bill/1838

[coldworld]

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@Anonymalous wrote:

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@Abby4 wrote:

IMO the entire credit score and scoring industry needs a complete over haul............Who oversees this industry?

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If you want to overhaul the premises of the entire industry, you'll need to get the legislators involved.

The most recent attempt:

https://www.congress.gov/bill/118th-congress/house-bill/3881

https://www.congress.gov/bill/118th-congress/senate-bill/1838

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These bills don't have to do with credit scoring. Those bills are related to payment processors. The goal of these bills to increase competition between the networks. 

[Anonymalous]

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@coldworld wrote:

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@Anonymalous wrote:

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@Abby4 wrote:

IMO the entire credit score and scoring industry needs a complete over haul............Who oversees this industry?

---

If you want to overhaul the premises of the entire industry, you'll need to get the legislators involved.

The most recent attempt:

https://www.congress.gov/bill/118th-congress/house-bill/3881

https://www.congress.gov/bill/118th-congress/senate-bill/1838

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These bills don't have to do with credit scoring. Those bills are related to payment processors. The goal of these bills to increase competition between the networks. 

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Yes, but it indicates what they're focused on. There generally isn't a ton of pressure to revise the credit scoring system. It's more focused on things like consumer complaints or industry lobbying. That's why we've ended up with things like the Dodd-Frank act which created the CFPB, the original Durbin bill where debit cards were required to use multiple payment processors after complaints by merchants about swipe fees, and this one which wants to do something similar (but not the same) to credit cards. When there's discussion about the credit scoring system, it's usually in regard to expanding access to credit to those who are un- or under-banked, or perceived inequities in access, but that seems to be mostly soft pressure on FIs like Chase. There seems to be little or no interest in revising the scoring system for the sake of revising the scoring system, so we end up with incremental changes to proprietary and secretive models, and very slow regulatory revisions like Fannie Mae finally approving an update to the antiquated models used for mortgages.

[Abby4]

IMO the entire system is a scam, I just wonder who owns the credit scoring companies?  I opened up a new credit card, 3 different score changes, +2, -2 and -4. makes no sense, I pay off some of the balance, score changes + or - for the exact same balance change. I could go on, but I believe it is a bank owned raquet.

[Anonymalous]

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@Abby4 wrote:

IMO the entire system is a scam, I just wonder who owns the credit scoring companies?  I opened up a new credit card, 3 different score changes, +2, -2 and -4. makes no sense, I pay off some of the balance, score changes + or - for the exact same balance change. I could go on, but I believe it is a bank owned raquet.

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Fair Isaac owns/creates FICO (you're on their board, right now). VantageScore is owned by the 3 credit bureaus, Equifax, Experian, and Transunion. They're not owned by the banks, though many banks generate their own internal scores and use them in lending decisions.

A score change of -4 to +2 is almost entirely irrelevant.

[SouthJamaica]

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@Abby4 wrote:

IMO the entire system is a scam, I just wonder who owns the credit scoring companies?  I opened up a new credit card, 3 different score changes, +2, -2 and -4. makes no sense, I pay off some of the balance, score changes + or - for the exact same balance change. I could go on, but I believe it is a bank owned raquet.

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1. It's a publicly owned company.

2. Its customers are financial institutions, so banks are the group to which it is trying to appeal.

3. Trying to assign cause-and-effect relationships from data changes to score changes is an impossible task without daily updates of both the data and the scores, which would probably cost you around $1200 month. And even if you had such daily updates, any date on which more than a single data change occurred would block your knowing which data change contributed how much to the score change. Relying on MyFICO alerts would not help because (a) they do not necessarily have any cause-and-effect relationship between the alert substance and the FICO score tacked on to the alerts and (b) they do not provide the date of either the data change or the score change.

4. Like @Anonymalous said, such small score changes as the ones you mentioned are meaningless in any event.

5. It's not a "scam"; its customers know what they're getting. If by "scam" you mean that its algorithms are unfair to consumers, I'll agree with that, but so is the whole financial system.

6. As to who is overseeing the industry, that's called government, and half of Congress is working actively to try to remove even the minimal protections consumers do have.

[AndySoCal]

@Abby4  Here is some information for your consideration. The FICO scores is the product of the Fair Isaac Corporation.  This company's stock is traded on the New York Stock Exchange.  Fair Isaac been in busines since 1956.

 The FICO score is a risk score. The score represents the level of risk a consumer might be in making a loan to.  FICO does this by analyzing the credit history of the consumer. Fair Isaac has changed the score model over the years you see this in the versions of FICO score. For example  when I first started working in credit 30+ years ago FICO version 2 of Experian was the latest model now it is FICO version 10.  Each version represents a change(s) in the scoring model. Ironically when I applied for and was approved for a credit card recently the lender used FICO v2 which higher than my FICO V8 score that I get from Experian in my credit monitering.  I would have thought it would have been the other way around. 

Is the bank regulators aware of credit scores and their potential impact ? Yes

Here is a link with some information you might be interested in from the FDIC

https://www.fdic.gov/regulations/examinations/credit_card/pdf_version/ch8.pdf 

I apply the same approach to my credit score as I do my stock and bond mutual funds. If I (speaking for me only) allow myself to get caught up in the daily ups and downs of the prices changes my mutual funds I will drive my self nuts so to speak. Far too often when people see or hear the stock market is returning 20 to 30 percent in a year they buy mutual funds etc. The same people when the market goes down sell the funds. So in essence they buy high and sell low not a good way to make money. I look at the quarterly statements and I look the long term direction of the fund price and results.  I do a similiar process with my credit score from the bureaus I look at the long term direction of the score over several months or a year. I do this because I know everytime a creditor reports a change on my account(s) has the potential to change the credit score. I try to ignore the short term static in either direction and look at the long term.  I hope this helps