The Truth about Score Bands

[fused]

Midnight, I stunned! I consider mangos to be the most delicious thing on Earth. Of course, you might be eating junk mangos. I have never had a semi-decent mango on the mainland, Florida included.

[MidnightVoice]

I have eaten the **bleep** stuff fresh off the tree on three continents and it always tastes like turpentine to me

[paradise1]

Thanks Timothy,

An 80 point jump would be nice.  My oldest account is an installment loan started about 11 years back with no lates or derogatory information.  I would say the average age of my accounts is about 7-8 years. 

BTW, no SW intimation yet on the updated balances and today is the last day of the month.

Paradise

[haulingthescoreup]

---

@paradise1 wrote:

Thanks Timothy,

An 80 point jump would be nice. My oldest account is an installment loan started about 11 years back with no lates or derogatory information. I would say the average age of my accounts is about 7-8 years.

BTW, no SW intimation yet on the updated balances and today is the last day of the month.

Paradise

---

Sadly, you might not want to hold your breath on the SW update. In this case, no news might well be good news.

[Tuscani]

I will share my theory. The purpose of pools (aka scorecards, buckets, ect.) works out more to the benefit of those with derogs or very little to no history than it does them harm.

If there was only one simple bell curve including all credit files then those fortunate, extremely long established folks would have the whole top half of the score numbers scale absolutely locked up tight.

So where would that leave the person who is only beginning to build a credit history at all? Or who has had some derogs in the past but now is trying to work toward a better CR and score? They would be locked down into the basement of the score range for probably ten, twenty years or more. There's no WAY that that new user or rebuilder individual has as much good history yet as that long established individual does.

So what the pools are attempting to do is to help potential lenders figure out which of the new-credit individuals are showing characteristics which usually go on to blossom into a long clean history, and which other ones don't. The same for rebuilding individuals. By assigning relatively better scores to top of each scorecard and lower scores to the least improved, the individuals who are making progress float to the top. They actually are scoring a bit better than they would if being compared head to head with Mr. Jones who has no derogs whatsoever and has 30+ years of history already.

By trying to compare apples to apples and oranges to oranges, that means that amongst the pool of individuals who share certain key history elements, Customer A looks most like someone who will continue to do better and better and is not as likely to default whereas Customer B from the same group is not showing those indicators of steady improvement.

If it weren't for scorecards, IMO, it would be very difficult to get decent mortgages and accounts and loans without thirty years of history already established. That would mean that it would be like climbing an ice mountain barefoot to buy a house or a car or open a credit card before the age of at least forty or fifty.

The pools tend to be split out according to:

-Age of file (length of credit history)
-Thickness of file (number of trade lines)
-Presence of a new account (opened within past X months)
-Presence of seriously negative payment history (90+ days late, charge off, etc.)

[Anonymous]

How does one continue to show steady improvement when they have already nearly perfected their credit to keep going higher? I want to stay on the improving scale.

Message Edited by ilovepizza on 10-01-2007 09:23 AM

[paradise1]

Hi,

The explanation of the score pool/scorecard system makes sense provided that all lenders have a way to look beyond the magnitude of the score.  For example a score of 620 from Scorecard - A may not have a more adverse credit report than someone with a 660 score in Scorecard-B.  If you take a snapshot in time, it makes no sense to ding someone with a higher mortgage/loan rate for moving from a 660 score to a 620 score ( only because they moved scorecards, assuming there is no negative information).  I am not sure if lenders truly understand or even buy into this relative scale.

I also think that people ought to be rewarded to maintain good scores in the form of better interest rates.  Yes I am suggesting absolute grading compared to the relative scale.  If everyone met the critieria for a 700 or 750 score, they should be rewarded with that score and not compared to what people in that scorecard have performed. Granted that the criteria needs to be stringent such as X years in length of total account, average Y% of balance in revolving accounts over the last 6-12 months, average length of accounts should be Z years etc etc.  If someone meets these criteria, they ought be rewarded with a higher score because it displays a consistency of good credit behavior.  People who are rebuilding their credit should benefit from derog information aging out or being removed and should know that they can reach the high scores if they consistently displayed good credit practices.  This is not perfect either but at least there is some transparency.

Just my 2 cents.

Paradise

[Anonymous]

I don't know where to post this.  Experian reported a reason code 14 'relatively short history of using credit'  to explain why my score wasn't higher.  WHAT??? 

 I am 60 years old and have had all kinds of accounts, home ownership, cc's before, during and since my marriage.  I doubt they penalized my ex husband with a code 14 on his credit history.  I was the primary on major credit cards during and since marriage, plus joint ownership on homes.  Plus auto lending was solely in my name on occassion.

  I think this is outrageous and want to address it with Experian.  I don't know if this affected my interest rate on my home purchase recently,  but the code 14 was included in the report at that time, I am learning from lender B of A closing docs.

 I am ticked. 

[chickadee]

Without having much more info, I would take a shot in the dark and say that many of your oldest accounts have been closed for more than 10 years and so fell off your reports. For instance, I opened my first credit card in 1990 and then I thought it would be best to close all of my credit accounts, so the last of those accounts (because they're closed) will fall off next year and it will look like I've only had a history for 7 years, and I don't have that 17 year history that I would have had if I had kept them open. Does this seem like the case with you?

[RobertEG]

Fair Isaac posts have consistently shown that %uitl is almost a linear function.  Each of their risk bands show almost s direct linear digresssion.  So, just take your percent util, multiple that by the max %util points for revolving of around 213 (30%, or 255 points,  goes to overall % util, with 213 to revolving, and 42 to installment) and you will have a very good estimate of what you are losing, and what can be gained by decreasing % revolv util.  at any given percentage.  So if you are at 20%RevolvUtil, you will lose lose 43 out of the max 213 pts revolv util.  It is close.   I have modeled it for a long, long time.  It works.  but of course, bands can shift it.