*FICO is a Scam*

[pipeguy]

I understand your frustration, the FICO model is hard to figure out sometimes and why is that each of my CRA's numbers are different? That being said, the value of a near-universal credit scoring system, even with it's at times flaws, is that not only is overall access to credit greatly expanded, written paperwork reduced and universal mobility possible. Think about it this way, at one time if you needed a car loan or a bridge loan say for holiday spending you went into your local bank where you had an account - that lender knew you and your history and would either say no, or if it was approved the bank would tack on an interest rate that protected their risk (how do you think your small bank "lates" would  work out?). 

Then came credit cards, first local and store cards, then the bank cards (MC/V) AmEx and Diners were mostly business cards, Discover started as a mix of store card and semi-universal as the NEC Card. You can look up the history of these companies and see how they have evolved. 

To expand on universal credit cards (mostly MC/V, originally known as Master-Charge and BankAmericaCard or BAC) a lot of lenders wanted in on the action, thus the need for a somewhat universal "risk measure" which Fair Isaac developed. With FICO scoring, you can online get approved for a card or car loan or personal loan or even a mortgage from a lender in New York or Delaware or Utah or North Carolina. In addition say you move from St Louis to Boston, you access to credit doesn't change, nor do you toss out a local bank history and have to start from scratch with a new local bank especially when the transmission in your car goes out and you need access right now to $2000.    

FICO is the defacto standard in the lending industry, there are others (Vantage, etc) but FICO is almost universally relied on by lenders. FICO does a lot more than just offer scores, just look at their company business page they sell information and scores to lenders, collection agencies, employers, etc - it's their business product, measuring risk and return. 

I know its great when all your scores are 780-820 (the gold ring is 850, but that makes no difference) and to many on these forums it's an obsession to track, tweak, work and live to get higher scores, but that's just a game some play. FICO scoring has opened up access to credit for millions of consumers in a way that would never be possible without "blind scoring". I don't always agree with what causes the hills and valleys throughout the year, but its anything but a "scam".   

[egghead88]

Just because you haven’t taken the time to research FICO scoring doesn’t make it a scam. I would highly suggest that you spend some time of the reviewing FICO scoring models and develop a plan to improve your score.... thats all I have to say about your post- Forrest Gump voice

[NRB525]

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@Anonymous wrote:

The scam is in FICO preserving the interest of lenders/reporting agencies by making additional money for said lenders off people for bad decisions that realistically have no relevance to present circumstances.  By keeping people's scores low they benefit their employers, seems like a conflict of interest, especially when the time comes to renew a contract with a lender or reporting agency. This may be a false assumption, but I cannot imagine I am the only one experiencing a flat score over 5 years.  Especially, when I come to this website and hear the extreme opposite, boasts of people increasing their scores by 100 points in a year, short of winning the lottery or becoming independently wealthy I don't see how that is possible.  

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Many of the situations where you might see someone with a 100 point increase are where all their baddies are bunched in the past, and over the course of the year, the last of all those baddies drop off. A BK that filed seven years ago, some other late payments at about the same time, maybe a government lien, when the person when through troubles, those all age together.

While those are on the report ( your current situation with some baddies ) they will put a ceiling on how high the score can go. Once the last of those baddies drops off, when all of them are gone, then the payment history only shows good payment history for 7 years, and the score is able to increase, often quite a lot.

Your comments are quite common here. Folks come here looking for advice about how to improve their score, and sometimes cite the fact that "I have not missed any payments for 12 months" or pick a time period. That's nice, and certainly important in rebuilding your credit score, however lenders have to sort through thousands of credit applications. They use FICO scores to get a snapshot view of the kind of borrower this person is. "Over the last seven years, what sort of borrowing behavior did this applicant have?" Rather than wade through a potentially complicated credit report, line by line ( many here have 20 or 30 or more accounts over time) the lender pays FICO to give them a snapshot score. That score is standardized, weighing the factors that are available.

The final thought, remember that borrowing and credit are all about trust. If you have broken the trust on a loan agreement in the recent past ( seven years on the scoring models ) that indicates a possibility you might break the trust again. The factors in why a payment was missed or why BK was necessary are something to discuss with a loan officer, but as a starting point, that trust score is where most of the banks begin. It simplifies their workday.

[Anonymous]

Increasing FICO score by 100 points in a year?  People have been able to accomplish that in a month or even in a day, depending on how dramatic the credit profile changes are.  It doesn't make FICO scoring a scam.

[sarge12]

If the OP would research enough it is possible he could discover why that 1 score dropped 25 points. It could be that CRA has not gotten the updated balances yet, or even that some of the info is not reported to that CRA at all. Not all creditors report to all of the big 3 CRA's. A 25 point difference suggests that the Utilization reported there would be a likely suspect, or maybe a neg that has fallen off the other 2 but not that one yet. It is sometimes difficult to know why a score increased or decreased, but can change a good bit once some thresholds are met. Some of these may be over 29% utilization on a single card, or over 9% overall. The accounts being considered may also have your AAoA showing lower on that 1 CRA, where the other 2 might have crossed a threshold...3yr AAoA, 5yr AAoA...whatever! The best way to know is to pull all 3 credit reports at the same time and deep dive looking for differences between the 3. There may even be errors you can dispute. What it is not though is a scam, and the CRA could care less what our scores are. They only care that it has a good record of being predictive of defaults and delinquincy. That is the CRA's bread and butter...assigning a score that assesses risk of the debtor to minimize the losses to the lenders, and yes, charge more in interest for a higher risk debtor to compensate for the higher number of defaults. That being said though...mistakes can and do happen. I will say if you do AZEO and always PIF everything the scores will likely be very close to the same. It is very difficult to not show some swings carrying a balance.

[909]

So many possible responses...
- Just because you haven’t taken time to become educated about the system doesn’t mean it’s s scam...
- Just because you’ve made bad choices in the past doesn’t mean it’s a scam...
- Your income has nothing to do with credit worthiness (see the first bullet)...
- True, there are some oddball equations involved, but the people making these decisions (about credit scoring) know a lot more about forecasting behaviors than anyone on this list and those decisions are based on millions of observations, not just things that some of us may have personal opinions about.

Keep asking questions, keep learning. You are in control of your credit score.

[sarge12]

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@909 wrote:
So many possible responses...
- Just because you haven’t taken time to become educated about the system doesn’t mean it’s s scam...
- Just because you’ve made bad choices in the past doesn’t mean it’s a scam...
- Your income has nothing to do with credit worthiness (see the first bullet)...
- True, there are some oddball equations involved, but the people making these decisions (about credit scoring) know a lot more about forecasting behaviors than anyone on this list and those decisions are based on millions of observations, not just things that some of us may have personal opinions about.

Keep asking questions, keep learning. You are in control of your credit score.

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+100....I could not agree more....Anyone can in time get 800+ scores, the key is to learn what is in the score and act accodingly. Everyone should read "Learn About Scores" section above, and every single sub-catagory in it.

[Anonymous]

I really am enjoying the thread OP started my interest was peaked on the notion of FICO being a kind of scam.

[Anonymous]

Since the OP hasn't returned a post in this thread, I'm hopeful that his time has been invested in improving his knowledge through reading about credit on this forum.

[NRB525]

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@Anonymous wrote:

Since the OP hasn't returned a post in this thread, I'm hopeful that his time has been invested in improving his knowledge through reading about credit on this forum.

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Maybe you spend too much time on MyFICO? The OP original post was only yesterday afternoon. Chill.