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We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.

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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@longtimelurker wrote:

A clarification of my earlier question to explain a little more in light of all the questions here!   My understanding has been that the FICO algorithm is derived from "big data" so while things might not apparently make sense, the correlation is there (and that's all that lenders need to know).  I thought that this might be why, for example,  AZEO can improve scores.  It's not obvious that having exactly one card showing a balance should indicate better credit worthiness, but data might show that.

 

So, in theory, if data mining showed that spending between $50 and $75 at an electronics store In March was highly correlated to a default within 6 months, a newer version of the algorithm would severely penalize such a purchase.   Is my data mining understanding correct, or is there more cause-and-effect input?



Elizabeth Warren, Senior Product Manager at myFICO: Firstly, the FICO Score does not consider where you spend your money in its algorithm.

 

Secondly, your data mining understanding of the model is incorrect (at least for the FICO Score). It is correct that the factors considered by the FICO Score are determined based on observed correlations with credit risk.  However, the FICO Score algorithm isn’t trained using ML-only models (machine-learning-only models).  The FICO Score algorithm is based on a scorecard system that emphasizes explainability and transparency.  In contrast, ML-only models can have predictive factors that are harder to identify.  Also, ML-only models may pick up predictive factors that are unfair to consumers. To learn more about the differences between the FICO Score scorecard model and ML-only models, check out this white paper: https://www.fico.com/en/resource-download-file/6559 

Message 101 of 112
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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@coreysw12 wrote:

Is it possible for someone to have a credit score so excellent that they'd be way above 850 (if the score range wasn't capped at 850) thereby making it possible for them to take a credit hit (inquiry, new account, etc) and still have an 850? Or is 850 only possible if you have a perfect, impeccable credit history and that anything bad at all will always result in a sub-850?

 

In other words, if 2 people both have 850's, is it possible for one of them to be just "barely" 850, teetering much closer to the edge of dropping into 849, than the other person who is "well into" 850 with plenty of wiggle room?



Tom Quinn: By product design a user’s (base) FICO Scores cannot be greater than 850 and can’t be greater than 900 for the industry versions of the scores.

 

Visit the following link for more information about an 850 FICO Score https://www.fico.com/blogs/850-fico-score

Message 102 of 112
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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@Vegasr wrote:

Hi.

My 2 questions are pertaining to hard pull inquires.

 

  1. If after 12 months there is no longer a hit to one’s credit score, then why does a inquiry stay on a credit report for 2 years and not 1?
  2. Can there not be two different inquires, one for applying for new credit and one for a credit limit increase?  With different lengths and/or impacts on the credit score?

 

Thank you. 



Tom Quinn: Inquiries can stay on your credit bureau report for 2 years (the credit bureaus determine this) while FICO Scores only consider inquiries in the past year.

 

Generally speaking, inquiries don’t drive the score and the additional permutations listed would likely have little impact on more accurately predicting future credit risk.

Message 103 of 112
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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@Meanmchine wrote:

@Vegasr wrote:

Hi.

My 2 questions are pertaining to hard pull inquires.

 

  1. If after 12 months there is no longer a hit to one’s credit score, then why does a inquiry stay on a credit report for 2 years and not 1?
  2. Can there not be two different inquires, one for applying for new credit and one for a credit limit increase?  With different lengths and/or impacts on the credit score?

 

Thank you. 


Referring to #2, Can there be a new inquiry coding for employment, bank accounts, etc that are not credit related



Tom Quinn: The bureaus currently have various types of inquiries that are identified as non-credit related (employment screens, insurance renewal, etc.). These non-credit related inquiries are not considered in a FICO Score calculation.

Message 104 of 112
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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@electra wrote:

In the case of an old (4-7 yrs) unpaid credit card charge off, what is the impact of either:

 

  1. Paying it off in full (one payment)
  2. Settling for less
  3. Making installment payments to pay it off

I've heard that it's not advisable to pay off an old charge off if you will be seeking a loan in the near term as it may actually have a negative impact on your score.  I *think* this may be true for the 3rd scenario as I believe it may update the date to make it a brand new charge off or DOFL, is that correct?  If so, does that mean that it would be counted as a more recent negative or that it would reset the clock to 7 years from the date of the first installment payment or both?

 

Would scenario 1 and 2 would be identical to each other in terms of impact and reporting?  Basically, the balance owed should be updated to zero in both scenarios which would lower utilization and should theoretically improve the score especially if it was the cause of high utilization.  Is that correct?  Or, would the date of the CO and/or DOFL be updated so that the charge off would reset the clock for another 7 years and/or show as a more recent negative thus causing a negative or neutral overall impact to score?

 

I understand that specific impact is very much dependent on the whole picture, so if you aren't able to give a ballpark of impact, can you specify how the report will be updated for each of these scenarios? 

 

Thanks in advance for your insights!



Tommy Lee: The impact to the FICO Score is greatly dependent on how the data is reported by the credit bureau, and the entire credit profile (not just the account in question).

 

How these scenarios are reported in the credit file are determined by each credit bureau.

Message 105 of 112
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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@Dumbee wrote:

A curious question

 

When designing new scores and formulas, whether public (like FICO 10/10T) or internal/private, did these forums ever influence them? 



Tom Quinn: A variety of market research and data evaluation are included in our processes for redeveloping/developing new analytics.

Message 106 of 112
myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@coreysw12 wrote:

Why does a mortgage only count towards "credit mix" when it's not paid off? For example, people will often get a substantial score drop and multiple Reason Codes citing the lack of an open mortgage, as early as the very next month after the mortgage was paid off. It seems counterintuitive - someone who has recently demonstrated that they can pay off a mortgage in full should, I would think, pose less of a credit risk than someone who still owes money to a mortgage.

 

Followup question, is it a requirement to have an open mortgage to get an 850 score, or is it nearly impossible to get 850 without one?



Tom Quinn: Having a mortgage loan with no missed payments and a low balance along with other types of credit demonstrates that a person is able to manage a variety of credit types. Having a low mortgage loan balance to loan amount ratio is considered slightly less risky than having a 0% mortgage loan ratio. In other words, after the loan is paid off, it no longer shows that you are actively managing such a loan.

 

There is no requirement to have an open mortgage to get an 850 score.

Message 107 of 112
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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@CassieCard wrote:

Did analytics provide any input for the various ratings we see on a myFICO 3B report under Ingredients?

 

Many people believe these are just 'fluff' and don't have any real meaning and/or they are just estimates made by some front-end developer.

 

score_ingredient_ratings.png

 

Amount of Debt, Credit History Length, Amount of New Credit, and Credit Mix are also listed with associated ratings of POOR, FAIR, GOOD, VERY GOOD, or EXCEPTIONAL.



Tommy Lee: The same FICO analytics and data science team who work on developing the FICO Score also work on the analytics driving the myFICO ingredients. 

Message 108 of 112
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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@Brian_Earl_Spilner wrote:

What's the deal with the resiliency score? What is that based on? 



Tommy Lee: Please see the following blog for more info about the FICO Resilience Index: https://www.myfico.com/credit-education/fico-resilience-index

Message 109 of 112
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myFICO Employee

Re: We’re Tom Quinn & Tommy Lee - FICO Score Experts! Ask us anything.


@Curious_George2 wrote:

In version 8, there is a scoring penalty when all cards on which a consumer is an authorized user report zero balance. Is that intentional or a bug?

 

Do you have the ability to fix bugs after a scoring model (e.g. FICO8) is released, or are you (and we, and lenders) stuck with it until you release and lenders adopt a new scoring model (FICO9 or 10)?



Tommy Lee: Analysis on millions of credit files indicates that there is more risk associated with those with zero balance than those with small balances. Having low utilization is an indication that you have credit and are using it responsibly. So, the FICO Score considers consumers with a small balance more favorably than those with zero balance.

 

We can fix bugs to a score after it is released. 

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