TIME: Understanding its relevance to FICO scoring.

[Gidgetmom]

My opinion has no bearing on the outcome either.  It's just a really interesting discussion you have brought to life.  Consider me the devils advocate to your proposal, with no disrespect intended.  I am enjoying the intelligent discussion, not discounting your views in any way.  If you feel otherwise please say so, and I will politely back out of the thread.

I wasn't trying to say that the "perfect" profile is suppressing the spotty (I am aware than no person's profile has any bearing on the other).  The time line however "could".  My question was...what is to be gained for "perfect" profile by additional time being on a person's record, when "eventually" they both "can" end up at a similar score regardless. The spotty profile changes their behavior for the better and maintains it for 7 years and becomes viewed better by the algorithms, so what is to be gained by the perfect profile in this instance?  

The word "eventually" can imply the current 7 year limit or your proposed time limit.  Both parties could still end up similar in the end.  Who is being hurt by the current system?  The perfect profile is still perfect and the spotty profile has done the work and waited the time (7 yrs or your timeline) to become better.  I'm just not seeing an advantage to either party by increasing the time.  The lesser profile was punished every step of the way before becoming a better profile.  To add more time, just allows for longer punishment.  Doesn't society as a whole reap the benefits of everyone paying their bills, regardless of "when" they realized the error of their ways?

Gotta go back to work!  You have a wonderful day!

[Anonymous]

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@sarge12 wrote:

The idea of forgiveness of bad debt in 7 years actually stretches back over 2000 years, and rules do not allow me to discuss the orogin of the 7 year practice.

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The origin of cycles of release actually dates back at least ~5,000 years from evidence of records from Assyria, and the 7 year Shmita dates back to sometime in Ancient Israel.

It's okay to talk about history and let people go explore it. ^_~

[Anonymous]

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@Anonymous wrote:

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@NRB525 wrote:

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So while the idea of borrower intent and long history of patterns is an interesting idea to try to include in a FICO model, that actually gets taken into consideration with manual underwriting, where the lender really cares about the amounts being lent out.

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And that comes back to one of my original points... that a credit score (risk factor) IMO should more closely match what is perceived with manual underwriting.  There are 2 different arguments here.  One is that it should or shouldn't, period.  The other is that while it could be meaningful, the algorithm isn't capable of what the human brain is.

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I definitely believe it should and that it eventually will be more powerful than a person. Everything I have worked on since I started working was to replace a human being for efficiency. Saving time, money, and eliminating human error. Only using a human being for two requirements - 1) input, 2) research.

I imagine eventually this will be perfected to the point where job security will only exist in the form of those who can build neural networks for AI... which of course would end when the neural networks were robust enough that AI could create itself. 

[Anonymous]

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@Gidgetmom wrote:

My opinion has no bearing on the outcome either.  It's just a really interesting discussion you have brought to life.  Consider me the devils advocate to your proposal, with no disrespect intended.  I am enjoying the intelligent discussion, not discounting your views in any way.  If you feel otherwise please say so, and I will politely back out of the thread.

I wasn't trying to say that the "perfect" profile is suppressing the spotty (I am aware than no person's profile has any bearing on the other).  The time line however "could".  My question was...what is to be gained for "perfect" profile by additional time being on a person's record, when "eventually" they both "can" end up at a similar score regardless. The spotty profile changes their behavior for the better and maintains it for 7 years and becomes viewed better by the algorithms, so what is to be gained by the perfect profile in this instance?  

The word "eventually" can imply the current 7 year limit or your proposed time limit.  Both parties could still end up similar in the end.  Who is being hurt by the current system?  The perfect profile is still perfect and the spotty profile has done the work and waited the time (7 yrs or your timeline) to become better.  I'm just not seeing an advantage to either party by increasing the time.  The lesser profile was punished every step of the way before becoming a better profile.  To add more time, just allows for longer punishment.  Doesn't society as a whole reap the benefits of everyone paying their bills, regardless of "when" they realized the error of their ways?

Gotta go back to work!  You have a wonderful day!

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I think the bigger problem is this:

Person A with 670 score: 10 credit cards, all open 2 years or less, with perfect payments, 1 auto loan, 2 years old, no lates; 10 student loans ranging from $187 to $1,400 which 5 years ago all fell into 120 late status because of a head injury. 9% util, low limits, car loan is well within his means. He had to get a CFA loan after his head injury to make ends meet while he recovered from his injuries. He made payments always on time, and then when fully recovered he got a good job and paid it off in full early. He puts $3,000/mo in various savings accounts.

Person B with 770 score: 20 credit cards, all open 10 years or less, with perfect payments. Person B is very irresponsible, 29% util, but 100k in credit limits and is barely denting his debt every month. Can't put any money in savings and can't even afford to even get an auto loan. Person B gets payday loans to meet his monthly financial obligations and pays them off with credit cards.

Person A may have gone to one school, and only make one single payment every month to one guarantor. However, this person has 10x the late payments because of the account structuring. 

Person B is living well beyond his means, but still manages to scrape by each month to keep his utilization below the 30% threshhold. There's no record of his payday loan usage, other than cash advance markings on his credit card bills.

I think inquiries that result in denial are a crappy indication of anything as well.

Person A has 12 inquiries because he relocated for his new job and needed to get an apartment, a new phone, internet, insurance, utilities, and someone used his information to apply for credit cards that arrived at his previous residence in the mail. The cards weren't opened because they were caught by fraud detection systems, but this happened 4 months ago and the inquiries are still there. The companies refused to remove the inquiries without a local police report, despite being aware that they were fraudulent accounts that were never opened. Person A isn't going to travel back to the other side of the country to file a report on such a matter.

Person B has 1 inquiry because he recently opened a PayPal credit account and immediately ran it up to max utilization sending money to friends to aggregate back to himself to pay bills.

Data by the numbers in both of these comparisons is terrible. Is Person A really a higher risk than Person B? Of course not. This is where underwriting comes in, but sometimes people can't even get in that far. 

I think that important points will be connections - lumping person A's lates all together because they were all student loans from the same servicer, matching inquiries to open accounts, how far in the process the application went and why, and source (like utility company).

[Anonymous]

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@Gidgetmom wrote:

My opinion has no bearing on the outcome either.  It's just a really interesting discussion you have brought to life.  Consider me the devils advocate to your proposal, with no disrespect intended.  I am enjoying the intelligent discussion, not discounting your views in any way.  If you feel otherwise please say so, and I will politely back out of the thread.

I wasn't trying to say that the "perfect" profile is suppressing the spotty (I am aware than no person's profile has any bearing on the other).  The time line however "could".  My question was...what is to be gained for "perfect" profile by additional time being on a person's record, when "eventually" they both "can" end up at a similar score regardless. The spotty profile changes their behavior for the better and maintains it for 7 years and becomes viewed better by the algorithms, so what is to be gained by the perfect profile in this instance?  

The word "eventually" can imply the current 7 year limit or your proposed time limit.  Both parties could still end up similar in the end.  Who is being hurt by the current system?  The perfect profile is still perfect and the spotty profile has done the work and waited the time (7 yrs or your timeline) to become better.  I'm just not seeing an advantage to either party by increasing the time.  The lesser profile was punished every step of the way before becoming a better profile.  To add more time, just allows for longer punishment.  Doesn't society as a whole reap the benefits of everyone paying their bills, regardless of "when" they realized the error of their ways?

Gotta go back to work!  You have a wonderful day!

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I'm not really following your question here.  Perhaps you can present it a bit differently?  I'm not sure my response here will address what you are asking.  Above you stated that if the spotty profile changes their behavior and maintains it for 7 years it becomes viewed "better."  That's not accurate, as it is actually viewed as "perfect."  Aside from a BK that extends past 7 years, once 7 years passes it doesn't matter if someone has had 40 years of perfect credit history or 33 years of horrific credit history with the last 7 being perfect.  Both of these people with the current algorithm would potentially possess the same score (and thus evaluated equally with respect to risk), all other things being equal.

The "advantage" would be that longevity for superior credit behavior (sustained over considerable time) would be awarded with a slightly better score than someone that hasn't exhibited such behavior over that period of time.  If you're talking someone with a 640's score verses a 660's score as a result of this, it could mean the difference in the rate at which a mortgage is obtained.  Again, behavior vs circumstance.  If poor credit behavior is sustained for a extended period of time, it should take an extended period of time to recover from that.  If poor credit behavior is incurred due to circumstance and only lasts a short period of time, it shouldn't take as long to recover from it.  With the present system, it's 7 years regardless.  That's what I disagree with here.  Yes, I do think the "punishment" should be extended if the negative behavior is extended.  It's like if someone is found guilty of committing 50 crimes over the past 20 years, all other things being equal they will be punished longer than someone that is found guilty of committing 1 or 2 equal crimes.  7 years from now perhaps the person that committed 1 or 2 crimes has served their punishment, whereas the person that was found guilty of 50 crimes is likely still paying for their mistakes.  Conversely, using the same analogy above, if someone exhibits perfect behavior for their entire life and then commits a crime, their punishment is often considered differently than someone that has had "spotty" crime type behavior for the same duration of time.  Hopefully this makes sense. 

[Gidgetmom]

Edited for snarkiness I didn't realize was there until I reread it.  Sorry.

I understand what your saying.  You believe it should take longer to achieve a perfect score coming from a "spotty" payment history,

  Using you and I as an example, I just don't understand how you having a perfect score and my being able achieve a perfect score over time affects you.  You would still benefit from your perfect score the whole time that I clawed and fought my way back up to it.  Even if they added more time to the length allowed to report, the outcome could/would still be the same.  That's all I was trying to get at.  Whether it took me 7 years, or 20 years, the potential remains the same.  I see no reason to continue to hold someone down when they clearly are changing and growing.  What is the benefit in that?  

I really do get where you are coming from though. I have seen some threads that I wondered how their scores could be that good with such recent poor behavior (recently discharged BK, 10 30-day lates, 18 yr olds with 750 scores). However, I choose to be happy for them and just know that if they can do it, I can do it.  Teach me the rules, and I'll play the game.

Being a rebuilder myself, I want to believe that I have the possibility to overcome my poor behavior, crappy circumstances, or just plain stupidity of my past.  To know that there are people who believe I haven't suffered enough in my life (everyone has a story), and think I should be punished longer touched a nerve.  Regardless of the time frame 7yrs or your timeline...know that I will be at least trying to nip at your heels.    Not to catch your score, but for me...to better myself.  

Great thread...appreciate your insights.

[sarge12]

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@Gidgetmom wrote:

Edited for snarkiness I didn't realize was there until I reread it.  Sorry.

I understand what your saying.  You believe it should take longer to achieve a perfect score coming from a "spotty" payment history,

  Using you and I as an example, I just don't understand how you having a perfect score and my being able achieve a perfect score over time affects you.  You would still benefit from your perfect score the whole time that I clawed and fought my way back up to it.  Even if they added more time to the length allowed to report, the outcome could/would still be the same.  That's all I was trying to get at.  Whether it took me 7 years, or 20 years, the potential remains the same.  I see no reason to continue to hold someone down when they clearly are changing and growing.  What is the benefit in that?  

I really do get where you are coming from though. I have seen some threads that I wondered how their scores could be that good with such recent poor behavior (recently discharged BK, 10 30-day lates, 18 yr olds with 750 scores). However, I choose to be happy for them and just know that if they can do it, I can do it.  Teach me the rules, and I'll play the game.

Being a rebuilder myself, I want to believe that I have the possibility to overcome my poor behavior, crappy circumstances, or just plain stupidity of my past.  To know that there are people who believe I haven't suffered enough in my life (everyone has a story), and think I should be punished longer touched a nerve.  Regardless of the time frame 7yrs or your timeline...know that I will be at least trying to nip at your heels.    Not to catch your score, but for me...to better myself.  

Great thread...appreciate your insights.

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Gidgetmom....While I understand you taking some comments personal...I can assure you BBS did not mean it that way. I've had many discussions with BBS...some in which we disagree completely, but he is always respectful of others. He is not meaning he wants others punished...just feels that someone with a lifetime of being responsible should somehow be differentiated from someone who has had problems with credit. We often all talk theory here, please never take it personally.

[Gidgetmom]

No, no, no...not taking BBS personal at all.  I read snarkiness so I edited it, but did not mean I took offense.   When I said it "touched a nerve", it was only because I couldn't think of way to express how it affected me.  I'm not hurt, wounded or offended.   I have read many of his threads and respect his opinions.  I truly appreciate these types of discussions.  

In this instance, I have a different view.  That doesn't take anything away from his view.  Nor have I felt attacked or "punished".

i appreciate a person who tells it like it is and respect it immensely!  

Either way, FICO' timeline or BBS's timeline, I'm gonna keep plugging right along.  Really, it's all I can do. 

[Anonymous]

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@Gidgetmom wrote:

  Using you and I as an example, I just don't understand how you having a perfect score and my being able achieve a perfect score over time affects you.  You would still benefit from your perfect score the whole time that I clawed and fought my way back up to it.  Even if they added more time to the length allowed to report, the outcome could/would still be the same.  That's all I was trying to get at.  Whether it took me 7 years, or 20 years, the potential remains the same.  I see no reason to continue to hold someone down when they clearly are changing and growing.  What is the benefit in that?  

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You being able to achieve a perfect score in time doesn't impact me.  It's not about personal feelings or anything.  To me, it's about the algorithm generating a score that properly presents level of risk.  I simply believe that if someone for a long period of time displayed poor credit behavior compared to someone that for a long time displayed perfect credit behavior that 7 years from now all other things being equal one should be able to differentiate between the two profiles when looking at their score.  Again, it doesn't have to be a significant amount... but if two things are not equal, their scores should not be equal.  That's my opinion.  It's all relative to me.  If people knew that there would be lasting damage due to extended periods of poor credit behavior, perhaps it would give them incentive to "clean up their act" quicker.  With the current system, there are literally people that can completely tank their credit file on purpose, get out of paying debts, etc. and they know that in 7 years everything will be fine if they flip the switch.  Going back to my crime analogy, can you imagine if it worked the same way?  If someone had committed a handful of crimes over the course of a year or two but knew that regardless of how many more crimes they committed and for however many years, decades even, that the day that they stopped all would be forgiven in 7 years?  Would you feel better late at night in a dark alley with the person that "learned" from his punishment from 1 instance of attempted murder 7 years from now or the other guy found guilty of 30 instances of attempted murder 7 years from now?

[sarge12]

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@Anonymous wrote:

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@Gidgetmom wrote:

  Using you and I as an example, I just don't understand how you having a perfect score and my being able achieve a perfect score over time affects you.  You would still benefit from your perfect score the whole time that I clawed and fought my way back up to it.  Even if they added more time to the length allowed to report, the outcome could/would still be the same.  That's all I was trying to get at.  Whether it took me 7 years, or 20 years, the potential remains the same.  I see no reason to continue to hold someone down when they clearly are changing and growing.  What is the benefit in that?  

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You being able to achieve a perfect score in time doesn't impact me.  It's not about personal feelings or anything.  To me, it's about the algorithm generating a score that properly presents level of risk.  I simply believe that if someone for a long period of time displayed poor credit behavior compared to someone that for a long time displayed perfect credit behavior that 7 years from now all other things being equal one should be able to differentiate between the two profiles when looking at their score.  Again, it doesn't have to be a significant amount... but if two things are not equal, their scores should not be equal.  That's my opinion.  It's all relative to me.  If people knew that there would be lasting damage due to extended periods of poor credit behavior, perhaps it would give them incentive to "clean up their act" quicker.  With the current system, there are literally people that can completely tank their credit file on purpose, get out of paying debts, etc. and they know that in 7 years everything will be fine if they flip the switch.  Going back to my crime analogy, can you imagine if it worked the same way?  If someone had committed a handful of crimes over the course of a year or two but knew that regardless of how many more crimes they committed and for however many years, decades even, that the day that they stopped all would be forgiven in 7 years?  Would you feel better late at night in a dark alley with the person that "learned" from his punishment from 1 instance of attempted murder 7 years from now or the other guy found guilty of 30 instances of attempted murder 7 years from now?

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Bad analogy at least for me, BBS. If I am in a dark alley late at night....I'm Packing....no reason to fear!