Why Are There So Many Different Score Models?

[veracious]

Can anyone explain why there are so many different score models developed for the same purpose?

It seems silly to have hundreds of score models developed  by anybody and everyboy to serve the same basic purpose.

I know I've read on here that most lenders use FICO scores , so why are there all these other scores.

I wish I could find them all.    Anyone know a source that lists all of them?  Experian has 7 models or more.

Here's an example I found from an older article on another website.

.

http://www.credit-factor.com/creditscore/96-consumers-know-credit-credit-model

[haulingthescoreup]

Because the fine folks who develop and sell these other scoring systems make money off of them. Lots and lots of money.

[veracious]

Thanks, hauling!!!

I needed a good laugh.

Makes no sense, except for the fact  that it improves their bottom line.

[haulingthescoreup]

Seriously, that's all it is. They're not in it to benefit humanity, despite what their ads might imply. They're just taking advantage of the confusion of the average consumer.

Caveat emptor, and all that.

[MidnightVoice]

Why are there so many computer mosels when Macs are better than all the rest?

Same for Toyotas 

[llecs]

Also, look at it from the bank's point of view. If you are a lender and due to these economic changes, you see a bigger number of defaults. You don't want that and you know that FICO is a scoring predictor of risk. If you have a bigger number of defaults, then you'd want to change your lending criteria to make it tougher, but you'd also want to reconsider the scoring model. Maybe your demogrpahic and servicing area changed in a way which makes the scoring model obsolete or outdated. Assuming you aren't outsourcing to a Kroll or another tri-merge service, FICO (from what I read on their site) will present to you options. Maybe that TU98 isn't doing it for you. Maybe you want something newer than TU04 like a mortgage-enhanced score (I think it is available for TU too?), or a FICO 08 at least for TU (picking on TU for illustration purposes). From what I read, FICO will run your existing data and present models of past customers to see if a different model might fit you better. As a result, there are some lenders that are 100% loyal to TU98, most to TU04, and some rare ones I bet with the newer models. And that's just for a mortgage. Then there are specific models CCCs would use just for CCs and those change over time, and then other models for the auto industry and so on.

[veracious]

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@llecs wrote:

Also, look at it from the bank's point of view. If you are a lender and due to these economic changes, you see a bigger number of defaults. You don't want that and you know that FICO is a scoring predictor of risk. If you have a bigger number of defaults, then you'd want to change your lending criteria to make it tougher, but you'd also want to reconsider the scoring model. Maybe your demographic and servicing area changed in a way which makes the scoring model obsolete or outdated.        Assuming you aren't outsourcing to a Kroll or another tri-merge service, FICO (from what I read on their site) will present to you options. Maybe that TU98 isn't doing it for you. Maybe you want something newer than TU04 like a mortgage-enhanced score (I think it is available for TU too?), or a FICO 08 at least for TU (picking on TU for illustration purposes). From what I read, FICO will run your existing data and present models of past customers to see if a different model might fit you better. As a result, there are some lenders that are 100% loyal to TU98, most to TU04, and some rare ones I bet with the newer models. And that's just for a mortgage. Then there are specific models CCCs would use just for CCs and those change over time, and then other models for the auto industry and so on.

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Interesting point,  llecs.  

Although FICO claims that their scoring models do not consider demographics, race, age, etc. What you read on their website

seems to imply otherwise in certain instances.  I understand your intent (I think) and well know otherwise, but new visitors

may draw a wrong conclusion.   I also wonder if  FICO would use some "politically correct language" if soliciting the business

of those lending institutions who would request such a scoring model.

eta: spelling

[llecs]

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@veracious wrote:

Interesting point,  llecs.  

Although FICO claims that their scoring models do not consider demographics, race, age, etc. What you read on their website

seems to imply otherwise in certain instances.  I understand your intent (I think) and well know otherwise, but new visitors

may draw a wrong conclusion.   I also wonder if  FICO would use some "politically correct language" if soliciting the business

of those lending institutions who would request such a scoring model.

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I mean demographics as in lending within a given area or community as opposed to demographics per an individual. For example, after hurricane Katrina, I bet local and national lenders treated that area a little more differently due to the destruction and damage after the storm. They'd have to. The guidelines that applied before the mess would have to change due to the loss of employers, employment, drop in the economy, etc. I bet they looked at their scoring models, and especially their own guidelines, to see if the same rules would apply after the storm as before. If I were a bank, I'd run a zillion scenarios using FICO and different models if given the chance to see which scoring model fit best post-disaster.

[veracious]

llecs, you gave a good example.

Another catastrophe looms for the same area again.

Wikipedia defines demographics __ __

Demographics or demographic data are the characteristics of a human population. These types of data are used widely in sociology, public policy, and marketing. Commonly used demographics include gender, race, age, income, disabilities, mobility (in terms of travel time to work or number of vehicles available), educational attainment, home ownership, employment status, and even location. Demographic trends describe the changes in demographics in a population over time (for example, the average age of a population may increase or decrease over time). Both distributions and trends of values within a demographic variable are of interest..

So, I can understand why banks in a post-disaster area would have to consider the circumstances you mentioned, and not the individual

characteristics that are commonly associated with the term demographics.

[llecs]

Maybe a Metropolitan Statistical Area (MSA) Zone would have been better as opposed to demographics.