Subprime and Prime identifing.

[Anonymous]

fused111 wrote:

Around three minutes into the presentation, percentages (perhaps score values) are shown for CCs, mortgages and auto loans, and each of these has two categories prime and subprime.  Didn't you see this?  Am I the only who thinks somethings might change after watching this?

I'll have to watch it again. I saw the categories, but I think those are FIs scoring pools (Thin, New, Seasoned, et al.)

I look at the software industry and the ferocious firefights in court over who struck John, or Bill, or Steve, or Larry, etc. Their lawyers are fiercely protective of what's viewed as "theirs". I think the same sort of vigor would be exhibited by lenders.

FICO tallies up the risk factors, and delivers a score. That score is blind to race, creed, color, ethnicity, sex, age, salary, employment history, state you live in, neighborhood you live in, home you live in, car you drive, education level, height, weight, blood pressure, predisposition for cancer, political party affiliation, bumperstickers on your car, charitable giving, and a myriad of other things which do not determine your risk to pay or default on bills.

After FICO delivers the score, a CCC decides whether you get a CC and what the terms will be. Once you get the CC, terms of the CC may be negotiated over time. Requests for CLI and APR reduction. Lenders grant or don't grant based upon their criteria, and their criteria are very, very, very broad compared to what FICO considers. FICO looks at concrete things where there's a pattern and history of risk associated with the thing. For example, FICO does not look at salary, time in your job, do you rent or own, where do you bank, checking or savings or both, DTI, and a number of other things that lenders DO consider.

By assessing the CC or loan product itself, and assigning a risk to it, FICO would only further the divide between primes and subprimes. Prime CC holders FICO scores would bump up, and subprime CC holders would bump down. Congress is already looking at legal reform because of CC practices. If FICO did it, the legal reform would be all but assured and further reaching.

I stand by my prediction that if it ever happened, it would not stand up to the numerous legal challenges that would follow.

[MidnightVoice]

Well, it already talks about "consumer finance companies - bad", and no one has sued yet 

[Anonymous]

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MidnightVoice wrote:

Well, it already talks about "consumer finance companies - bad", and no one has sued yet 

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Yet, and that we know of.

That's a bit different because consumer finance companies are specifically identified as such by their bureau subscription codes--not their products. The lender itself is engaged in a subprime business, if you will. But you're right, there are four potential codes from using a CFC and paying ontime. [MyFico is cited by ICFE as the source of this info.]

http://www.financial-education-icfe.org/financial_news_press_releases/2004/20040726_adverse_action_c...

CFCs I suspect are very small potatoes without a lot of spare cash to sue. There might be a lot of them, and they might amount to a lot of business, but Chase, Citi, AMEX, BOA and other prime lenders have products which could easily be labeled subprime. Take on those boys, and I have no doubt they'll sue and win.

Sidenote: Do check out the ICFE link. They looked to have some useful debt, credit, CC info.

[Tuscani]

Good link. ICFE should read the Scoring 101 thread though.

"The ICFE wants consumers to understand if you have accessed more that 50 percent of your available credit limits on credit cards, your credit score will suffer."

[fused]

Noah:

Rather FICO does this or not, most consumers have an opportuntiy that is not new.  Forget about the AUs, many can become joint account holders or help someone else become one.  This is a simple way to get out of the subprime pool and jump into the prime one. 

[Anonymous]

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fused111 wrote:

many can become joint account holders or help someone else become one.  This is a simple way to get out of the subprime pool and jump into the prime one.

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But there are also many who cannot leverage a joint account to improve their scores. If both the husband's and wife's score is suffering, one ain't gonna pull the other up.

With AU benefits going away, I suspect there's going to be more than a few who are going to try and leverage a joint account with an unconventional relationship. One that jumps right out at me would be two members of a church. If the trust is there, one member adds another member in credit need as a joint account holder. Debtor in need pledges to the Sunday School Class or Men's Group or whatever to accept the joint account status, give back to the member with the good credit history the CC when it arrives in the mail so the debtor won't be tempted.

There's a church on the eastcoast, in Virginia I think, that made news several years ago because they were paying off their members CCs. They wouldn't pay off homes or cars, just CCs. Church member had to go through some required credit/debt counseling that the pastor and others at the church provided. Because I've never heard back about it in the news, then I presume it's been successful. Had things gone badly I'm sure that woulda made news.

Consumer groups would also rise up and fight such a FICO change I imagine. Anything that unites debtors and creditors doesn't seem to stand much of a chance.

[fused]

Noah:

Might we see these same sleazy companies who have been selling seasoned TLs for AUs now try and do the same for joint account TLs?

[Tuscani]

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fused111 wrote:

Noah:

Might we see these same sleazy companies who have been selling seasoned TLs for AUs now try and do the same for joint account TLs?

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Doubt it.. You are now talking about debt liability.

[Anonymous]

Like Tuscani said. Not likely. I suppose anything is possible, but it's going to require a considerable amount of juggling to make it happen.

When a con man sets up a con, he generally doesn't wanna risk more than he can afford to lose. Computer, printer, paper to send out bogus lottery checks. Rent some office space that's sitting vacant and doesn't want cash up front. Easy, peasy.

Joint account status opens up the con man's credit to the deep unknown. The person wanting to "rent" a joint account might be some honest mark, but it could just as easily be another con man.

Con in con man stands for confidence, but it also means control. Control the situation and control the mark. With a joint account, it's shared control and that's no kinda control for the con man.

To "rent" a joint account, there's going to have to be some serious trust in play. Personally I can't think of anyone, aside from my wife or one of my kids (they're 2 and 6 so it's gonna be a while) I'd sign onto a joint account with. Would never cosign a loan, although I'd float a downpayment.

Even my church example is going to be a stretch. There are stories of con men conning churches.

[fused]

Tuscani and Noah:

My bad, I should have included this in my earlier post.  What I meant was will these same companies be in the business of selling joint accounts with intention that their clients never actually receive the card and do not know the account#?  This way the company cannot get burned.

Message Edited by fused111 on 06-29-2007 01:13 PM