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There are dozens of credit scores that have been released over the decades. They each account for different data, and are intended for the same purpose, to judge likelihood of default on debt so the lending process can be automated. Is it objective how precisely risk levels are determined for each score, and if so can we tell which score provides the most accurate judgements of credit risk? This is a question I have been pondering over for months now. I would assume that newer credit scores would be more accurate because they account for more recent data. I would also assume that scores which incorporate trended data, like FICO 10T and VantageScore 4.0 do, would be more accurate in judgements with risk of default. Does anyone here have any thoughts on this?
Welcome @HighAchiever334
You can get your FICO 8/9 which is widely used by 99% of issuers right here on MyFICO 3B Pull. Vantage you can ignore except when it comes to Sync and very few others. FICO 10 hasnt been reported as being used as of yet. FICO 9 isnt even the go to score for all either. And there are over 100 CRA's as it is. Best to stick with FICO 8 and 9 for known creditors that use 9 for scores. If your interested in a card. You can always ask here and many will tell you who pulls who.
I don't think there's any way we could possibly know that, since not only are their algorithms proprietary, but so is the underlying data. As a result, it's not possible to objectively and independently test their efficacy. We fundamentally have to rely on their own internal assessments of their data and algorithms, and that they're moving in the right not the wrong direction.
Though it's worth noting that a lot of lenders seem to use their own internal scores, or at least have their own criteria beyond the score, because the boards are full of examples of people with poor credit being approved and people with outstanding credit being denied, and this seems to be more than simply accounting for additional data (like with a bank you already have a relationship with, for instance). That could be considered a lack of trust, or in the most generous interpretation, that scores in themselves are not considered sufficient for making a determination. The very slow rate of adoption of new models (FICO 8 was released in 2009!) by the market also shows caution, as does the reluctance to adopt different models (like VantageScore).
Finally, consider the data included in credit reports. It's limited. They simply don't have access to a lot of information, like nearly all rental and utility payments. They're making assessments based on a narrow set of data, rather than the full picture. As a result, there will always be mismatches between the true risk and the assessed risk.
What I think the OP was asking is which score is most accurate, if I'm right with that then there is no right answer. Every score's algorithm is set to different specs and leans more heavy on certain things like maybe Utl over new accounts or even vice versa. No one knows exactly what the algorithm's are but in here are some educated guesses. If I would have to choose I would say the most accepted and relied upon are Fico 8 unless it's for a mortgage then Fico 2-4-5. In time this might change but from past experience it seems FI are slow to change what scoring system they use and many are using a variety of some to create their own internal scores.
@RobynJ wrote:What I think the OP was asking is which score is most accurate, if I'm right with that then there is no right answer. Every score's algorithm is set to different specs and leans more heavy on certain things like maybe Utl over new accounts or even vice versa. No one knows exactly what the algorithm's are but in here are some educated guesses. If I would have to choose I would say the most accepted and relied upon are Fico 8 unless it's for a mortgage then Fico 2-4-5. In time this might change but from past experience it seems FI are slow to change what scoring system they use and many are using a variety of some to create their own internal scores.
The market has clearly chosen FICO 8, but the mortage scores persist because of inflexible and outmoded government mandates.
@HighAchiever334 wrote:There are dozens of credit scores that have been released over the decades. They each account for different data, and are intended for the same purpose, to judge likelihood of default on debt so the lending process can be automated. Is it objective how precisely risk levels are determined for each score, and if so can we tell which score provides the most accurate judgements of credit risk? This is a question I have been pondering over for months now. I would assume that newer credit scores would be more accurate because they account for more recent data. I would also assume that scores which incorporate trended data, like FICO 10T and VantageScore 4.0 do, would be more accurate in judgements with risk of default. Does anyone here have any thoughts on this?
I get the impression that FICO makes more money by coming up with more scores. So it is in its self interest to always proclaim that the newest model is better than previous models.
@SouthJamaica wrote:
@HighAchiever334 wrote:There are dozens of credit scores that have been released over the decades. They each account for different data, and are intended for the same purpose, to judge likelihood of default on debt so the lending process can be automated. Is it objective how precisely risk levels are determined for each score, and if so can we tell which score provides the most accurate judgements of credit risk? This is a question I have been pondering over for months now. I would assume that newer credit scores would be more accurate because they account for more recent data. I would also assume that scores which incorporate trended data, like FICO 10T and VantageScore 4.0 do, would be more accurate in judgements with risk of default. Does anyone here have any thoughts on this?
I get the impression that FICO makes more money by coming up with more scores. So it is in its self interest to always proclaim that the newest model is better than previous models.
I have not come across any publications by FICO making this claim. I would like to see some. When version 10(T) was announced FICO claimed two versions were released because lenders asked for it. So it seems that newer models account for data that lenders and CRAs want included.
@HighAchiever334 wrote:
@SouthJamaica wrote:
@HighAchiever334 wrote:There are dozens of credit scores that have been released over the decades. They each account for different data, and are intended for the same purpose, to judge likelihood of default on debt so the lending process can be automated. Is it objective how precisely risk levels are determined for each score, and if so can we tell which score provides the most accurate judgements of credit risk? This is a question I have been pondering over for months now. I would assume that newer credit scores would be more accurate because they account for more recent data. I would also assume that scores which incorporate trended data, like FICO 10T and VantageScore 4.0 do, would be more accurate in judgements with risk of default. Does anyone here have any thoughts on this?
I get the impression that FICO makes more money by coming up with more scores. So it is in its self interest to always proclaim that the newest model is better than previous models.
I have not come across any publications by FICO making this claim. I would like to see some. When version 10(T) was announced FICO claimed two versions were released because lenders asked for it. So it seems that newer models account for data that lenders and CRAs want included.
Well you'll have to get those from people in the banking industry, of which I am not one.
I have tripped across documents online, which are issued by FICO for the purpose of marketing their latest scoring models, but I'm not about to start researching it.
Here's one: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwimiIDh6J76AhUyM1kFHV2xBrcQ...