Comments on: Credit Score Transparency

By: Expert

Expert — Sun, 14 Aug 2011 20:36:52 +0000

FICO score is based on woodoo unproven behavioral statistics. It has nothing to do with you or me. It might be usable as predictor for similar large groups of people – in epidemic statistical sense – but it does not say ANYTHING reliable about an individual.
The FICO score would not pass a muster for expert testimony in the court of law and it should be forbidden in any free country.

By: Monica

Monica — Mon, 25 Oct 2010 16:42:49 +0000

I do too think that there should be more transparency.
For example, my credit score is very low. 670. However, I do everything right. I study, I check it, I follow every possible tip, do the right things. I have never ever been late. Never. Yet, I have never passed the 700 line. It is quite frustrating, as I make good money, have savings and want to buy a house now, yet banks won’t give me money due to my “bad” credit.
As the main reason for my low score agencies indicate that my credit history is very short. Yes, it is. Not because I’m young, not because I lived somewhere in the woods, but because I moved to the United States only 6 years ago.
Again, this is so retarded, as I have money for solid down payment, yet banks won’t lend, because my credit score is low, because I’ve been living in the country for only 6 years.

By: Aury (Thunderdrake)

Aury (Thunderdrake) — Fri, 21 May 2010 02:15:55 +0000

I’m with Brent on this one. I’d like to know exactly how credit scores operate!

By: RBK

RBK — Thu, 13 May 2010 00:45:39 +0000

Just wanted to make a correction or two here. I used to work in the credit scoring industry.

“Different credit bureaus come up with different algorithms leading to different numbers.”

This is not entirely true. When most people refer to their “credit score” they are talking about the FICO score, made by Fair, Issac. This uses the same algorithm no matter which bureau gives you the score. The number can differ from bureau to bureau only because the data varies slightly, not the algorithm.

The credit bureaus can and do use their own algorithms, like Experian’s PLUS score, but this is not the same as FICO and is not used widely like FICO is. In some ways the PLUS score is a better score, but it’s not as helpful to the consumer because few lenders use it to measure them.

There is constant research in credit scoring to improve the process and make the results more accurate. The current FICO is not the original FICO score, and Experian has several different scores for different purposes and calculated different ways.

More transparency is unlikely to happen because credit scoring is a business. If you knew exactly how your score was calculated, Fair, Isaac and other scorers would no longer be in business. Take heart, though– it is in their best interest to measure you accurately.

By: TJ

TJ — Tue, 11 May 2010 08:00:07 +0000

What confuses me are all the different credit scores. For example, on Experian, my score today was 738 for the Experian Plus Score, and that put me in the “excellent” category. Then, I bought my VantageScore from Experian…. same exact accounts,same exact day….I rated a D, a mere 682 on a scale of 501-990. My credit is very good…no negs, no lates, three paid auto loans all good, good mix of different types of credit, only carry about a 35% balance on two of my seven bank cards. So why am I rating such a low number with VantageScore yet not with the Plus Score? This makes no sense and makes the whole score thing seem so arbitrary. Why do some people have such high VantageScores, when mine is so low without any reason for it to be. I am curious to pull my FICO score right now and see how it compares to these other two scores…. This makes me so angry – just the complete lack of transparency and never knowing exactly what is making a certain score so. Anyone have any knowledge or thoughts on this?

By: Lazy Man

Lazy Man — Mon, 03 May 2010 21:23:02 +0000

CeridianMN, you just gave us a specific reason FOR it to be transparent. Race should not be factor.

In your scenario, everyone wouldn’t have a harder time getting loans. Banks would still want to loan out money. It would just be more fair for all.

By: CeridianMN

CeridianMN — Mon, 03 May 2010 20:42:41 +0000

Transparency would be nice, but I fear there might be some unintended consequences and side effects. What if one of the factors for calculating your score is race? (Do you really think one of them is not?) What would the ACLU do with the knowledge that Hispanics are given a different rating than Native Americans? Transparencey would be nice for many people that are intelligent and want to know what they can do to improve, but a large number of people would not fit this bill. They might complain about being discrimanited against and call for government to step in and even the playing field. Suddenly everyone has a harder time getting loans because some groups that used to be considered higher risk are now off-limits for making decisions on.

By: Brent

Brent — Fri, 30 Apr 2010 22:45:54 +0000

It’s true that good credit habits and money management will translate into a good score. Unfortunately we live in a world where every point matters. For example, I’m shopping for a home loan right now. I’ve had several lenders say that they are not allowed to give loans or preferred rates unless your score is a certain level. They used to be able to look at other factors and determine your rate. However, now it doesn’t matter if you have a good job, long credit history, no debt, etc. It’s all about the number.

So, suppose I need a score of 720 to qualify for a loan and I’m at 715. If we had a transparent credit scoring system then I would know what I could do to hit that number. Right now all we have are peoples’ best guesses which may help your score or it may hurt it. Basically I hate that your score is this great unknown when it doesn’t need to be.

By: Kenneth

Kenneth — Fri, 30 Apr 2010 22:10:06 +0000

@Randy

To be fair, 10 years ago credit scores did exist but most consumers didn’t know they were used.

But 25 years ago, loan decision where made by bank managers and loan officers based on a credit report. They used a mental score card and might based their decision on whether they had a good day or if they really liked you. I won’t take a stance on which approach is better.

By: Randy

Randy — Fri, 30 Apr 2010 21:52:40 +0000

Brent, you miss my point. 10 years ago, banks didn’t use your credit score. Yes, most banks do today. But supposing you’re going to borrow money for a car, what will you do differently if you know your score? The score translates to an interest rate, that’s what you’re really interested in knowing.

I’m a believer in checking your credit report and making sure it’s accurate. But if Bank1 gives me a rate that I think is too high, I’ll try Bank2. And I will certainly compare rates at different places.

By: Brent

Brent — Fri, 30 Apr 2010 21:29:52 +0000

Randy, what do you think banks check when you apply for that loan? No bank will issue a loan without first checking your credit score. So knowing your score and how it is computed is just part of good money management. Just because it is relatively new doesn’t mean it isn’t important.

By: Randy

Randy — Fri, 30 Apr 2010 21:19:06 +0000

I’ve yet to figure out why I need to know my credit score. The score is a relatively new number and before it existed, we had to go to the bank to find out what a loan would cost us. What’s different now?

The only debt I have is my house. I own roughly 50% of it and the bank the other 50%.

By: Brent

Brent — Fri, 30 Apr 2010 16:57:55 +0000

As a software engineer it bothers me to know end not knowing the internals of how my credit score is computed. For all I know, there might be code in there that says “If name == ‘Brent’ { score -= 20 }”. I think if people only knew exactly how their score is computed then they would take the correct measures to improve it and not just best guesses. For example, I would like to know that my score goes up a certain number of points every year because the age of my credit accounts increase.

I’m all for transparency.