@Anonymous wrote:Thx for the input. Oddly enough unless you are credentialed media, they won't even let you talk to anyone that has a clue. That being said they should advise CSRs to say they don't know instead of giving out wrong info, You can only get one rung up the ladder to a supvr and they are clueless too. My contention is press releases from FICO should indicate testing not in general use as this may never be in general use. Banking industry is very slow to change esp when its to the consumer's advantage unless the hammer of Thor gets involved .....CFPB. Thx agin 4UrHelp
Not entirely certain on that one: if a bank runs a new algorithm against it's existing portfolio (or runs them in parallel on new loan originations) and finds that it's a better predictor of default, they'll switch in a heartbeat. How long it takes for them to determine that of course is a multi-million dollar question.
I would agree CSR's should arguably be trained better, but it's pretty common in call centers just to say what it takes to get the customer off the phone, especially if calls / hour is their primary metric which it probably is in such a position as TU CSR at least.
Also in the general case, the decisions FICO Business makes are NEVER in the consumer's best interests... they are in their customer's best interests (not us, the lenders in this case) and any benefit to the consumers is largely incidental. It's pretty much a given that a paid collection and an unpaid one aren't viewed the same by lender underwriting (similar to open vs. paid tax lien though to my knowledge that didn't change in FICO 9) so why score them the same? Didn't make any sense and the lenders figured that out... and as such FICO went and eliminated that. Medical collections are similar at least from the various anecdotal stories found here.
Also the cynic in me would suggest this is a better way to entice users to actually pay since it would now make a difference in their score unlike previously where if you couldn't get it deleted, wasn't really much reason other than getting righteous by doing so.
In any event if the new score produces quantifiably better results for the lenders (or if it reduces their costs by eliminating some UW criteria... every little bit counts at scale) then they'll likely switch to it, and we're on six months now since theoretical release, it's certainly possible some smaller lender might have switched, but it may well be a period of a few years too for major market penetration.
@Anonymous wrote:Two things, it will take the bank years to have sufficient data to prove or disprove that a new scoring system is a better predictor. It will simply take that long to have new accounts to compare. Lenders being cautious to a fault, it will take years before they can see if the newer accounts scored w/ FICO9 are performing better or becoming sub/non performing assets more quickly. Then factor in recoverability post charge off...this is years of research. In my experience the new data would need to be overwhelming considering no FICO can factor in outside forces ie. a weak economy, Secondly any anecdotal info is usually from irate borrowers with poor credit histories and is like gleaning info from your senile uncle Charlie. Bottom line is my contention is they made a big deal outta something that is years away, if it ever happens. Like Dick Tracey's phone/ watch combo and the Star Trek communicator, 100s of millions will die before it's a reality. The articles made it sound like it was in use or would be in use shortly.
I agree with virtually everything you have stated in this post, but there's a number of businesses out there who's general lending practice isn't cautious at all and their data takes on the order of months rather than years to analyze (there are likely dozens of short-term lenders dealing in the deep subprime strata which are using FICO in their UW decisions, I know of 2 first hand). Admittedly, Chase and the major banks aren't likely to be one of those... but a smaller CU incentivized to switch? I could see it.
Also it wouldn't surprise me in the slightest if there was a marketing-available way (beta testers) to apply a score vs. an old saved report. If I were running a lending operation, unless there was a regulatory reason to do so (is there?) I'd never whack any of the old bureau data I pulled on customers. No reason to given how cheap infrastructure is and it may be relevant at some point (if we ever figure out how to really do anything with Big Data). At that point if I could run it against the last 3ish years of lending decisions and see whether it performed better or worse, I'd switch immediately if the data bore it out.
I honestly don't know how FICO plans to get market penetration on their newer scores, but I figure there has to be some business-friendly way of doing it. I wasn't around for the transition to FICO 8 by the majority of CC lenders, and we didn't have enough scores available at that point to really see what the time window was, but I'm hoping with the scores available now we'll be able to get some ability to see when lenders are moving to FICO 9.
@Anonymous wrote:As you have repeated and I agree with most of your points. But....I think the last ppl that would want to see credit scores improve are subprime vultures. Traditional lenders will takes years, if ever, to adopt a new system. My contention, again is all the media articles give only half the story, are very misleading and give false expectations and hope. I have not found anyone who writes on the subject to be reliable from Suze Orman to Dave Ramsey. They are clueless. I really appreciate your insight and quick reponses. Have a good holiday. Again thanks
I'm not sure on that one, the subprime vultures don't base their APR's on tiers unlike virtually every other lender. The rate is the rate is the rate, though if your score isn't high enough you might not qualify for the higher dollar / lower rate product.
FICO 9 has a number of changes it do it which if someone walks in the door in the first place for that class of lender, that a higher score will likely be a better predictor of default as someone who pays their collections and what not back, is more likely to pay them back too. I'm not certain that people who get righteous on past debts are necessarily a lower risk of quick default, but I suspect it's inarguable that you're more likely to be able to get something out of the otherwise dead paper if they do welsh.
My theory anyway, I just build the infrastructure for said institutions, no direct knowledge of their LO/UW guidelines. Anyway likewise have a good holiday and thank you for the interesting discussion!
@flan wrote:
@Anonymous wrote:As you have repeated and I agree with most of your points. But....I think the last ppl that would want to see credit scores improve are subprime vultures. Traditional lenders will takes years, if ever, to adopt a new system. My contention, again is all the media articles give only half the story, are very misleading and give false expectations and hope. I have not found anyone who writes on the subject to be reliable from Suze Orman to Dave Ramsey. They are clueless. I really appreciate your insight and quick reponses. Have a good holiday. Again thanks
All lenders benefit from having risk models that more accurately reflect risk. If the FHFA changes their requirements for GSE purchased loans, things will change very fast, depending on whether they continue to accept the fico 04 model (which is known to be not accurate) or insist on a newer model. (Also interesting will be what newer model they choose; it's quite possible they pick VS3.)
I believe the GSE's set the standards for that; if they won't move to a newer FICO product, doubt they'll switch to VS3.
I can't complain to much since I landed in the 720-739 tier which I'm incredibly happy about, but my VS3 is a 768-769 now /boggle.
Granted they could change their UW criteria on their rate sheet too to compensate.