@Anonymous wrote:
1) real time data. Why wait a month for updates. With modern technology, credit reports and scores should update immediately. This will cut down on "credit kiters", similar to check liters, they are the ones that BT from one card the day after stmt cut to payoff a card before its stmt date. They then apply for new credit and both cards show $0 balance when in reality there is a balance.
the banks, who are the primary customers, do have access to real time data
2) credit scores should factor in available assets. Why should someone credit score drop because they take advantage of 0% BT when they have substantial liquid assets to repay the line at any time. This is another flaw in credit scoring process.make it optional. By tying investment /bank accounts to credit score reporting algorithm to improve score for realtime liquid assets. Again the technology is already there, and would provide much stronger data and reliance for scoring model and lenders (they get approx estimate of liquid asset range, not exact account data).
available assets are not verifiable, it would just be a number the consumer picks out of the air
also it's not a great predictor of timely payment. lots of people have money available but aren't good about paying bills on time. some of the wealthiest people in our country got that way by stiffing creditors
3) there is a battle between consumer and card issuer. Card companies want you to use their line, but they also want you to carry less than 10% util for best credit scores. So I need $100k of credit to use $10k on my card. Assuming I have a 25 year perfect record not even 1 late pay, why should my score drop 100 pts because I temporarily run a higher UTIL, and have funds to payoff in full once 0% rate goes away?
no one with as strong a profile as that would lose 100 points for a temporary increase in one card's utilization
also there's no way of knowing if someone is maxing out a card for a clever reason such as 0% interest, or for the reason that they're under stress of some kind
4) factor types of credit. Charge cards get paid in full each month, revolvers have 0% financing which is advantageous to the consumer, so why are charge card and 0% rate balances deemed same risk as someone who cant repay and carrying balances at 20%+?
there's no way of knowing, as mentioned above
Ok, just my 2 cents on ways to improve scoring. Just because it made sense 30 years ago, doesnt mean it's still the best model today. Strive for better!!
It’s just analysis of aggregate data, of course it breaks down for individuals.
Most people who max out all their credit cards do indeed present a higher risk of default. I don’t even understand how that is debateable.
Finally Amex charge cards do not have the same risk factor: that is why they are not included in revolving utilization calculations for every model FICO 04 and above, which is to say the last decade and a half.
Most people who max out all their credit cards do indeed present a higher risk of default. I don’t even understand how that is debateable.
Finally Amex charge cards do not have the same risk factor: that is why they are not included in revolving utilization calculations for every model FICO 04 and above, which is to say the last decade and a half.
