Well, it's now September and according to the data I've examined nothing has changed with respect to FICO 08'. This could be because no lenders or credit report vendors such as Kroll or First American Credco are using this model. It's hard to tell if anyone ever actually will insofar as there are a voluminous amount of FICO models on the landscape. In any event, I've seen nothing to date and that includes Experian numbers. Perhaps, it was all a scare tactic. Perhaps, someone read the ECOA.
On top of that I don't recall ever seeing any announcement that said exactly what day iSeptember it was going to happen. And then how are we supposed to know when it happens until some people who have had their credit scores greatly improved due to their having purchased authorized user trade lines pull their credit reports and see the devastating results? Might even be October 1st or 2nd before we see the results if they wait till the end of September to actually implement it. That would be terrible if they waited till the end of September to make it happen, now wouldn't it??? LOL
On top of that I don't recall ever seeing any announcement that said exactly what day iSeptember it was going to happen. And then how are we supposed to know when it happens until some people who have had their credit scores greatly improved due to their having purchased authorized user trade lines pull their credit reports and see the devastating results? Might even be October 1st or 2nd before we see the results if they wait till the end of September to actually implement it. That would be terrible if they waited till the end of September to make it happen, now wouldn't it??? LOL
It's not going to happen folks, that is the moral of my post. Want to know why: 1) it's an invalid model under the ECOA no matter how you couch the language, 2) there are far too many FICO models out there now which have been used by specific lenders for years (they're not going to change), 3) now lender is going to wrap themselves in a potential class suit for using an illegal model nor is a vendor such as Kroll or First American Credco, 4) what lender would use a more stringent model in this bleak lending climate; and, 5) news is that the likely holding in Fair Isaac's litigation against the credit reporting agencies is to find that the Vantage score may proceed uninhibited. Why do you think only one credit reporting agency has stated that they will allow FICO 08' to be applied to their data? Don't you think they would all jump on board if there was no danger?
What section or sections of ECOA do you think it would violate? Something has to change. The gimmick you defend is intolerable if indeed it's use has been so widespread that it has led to or even had a substantial part in the current mortgage crisis or the huge increase in the default rate on credit cards. It can easily be seen as a whipping boy for the problems that have actually been caused by governmental mis-management of our economy and the blunders of a series of wars one after the other. The idea has been planted and if it don't get outlawed one way it will get outlawed another. No lender would ever let themselves get suckered into making mountains of loans which they knew or should have known would go sour on them either but they did. At least two major lenders in the real estate industry have gone bankrupt in the last two months or so. More will go bankrupt in the near future. What lender has a choice but to do something to stop the bleeding if at all possible? Again, authorized users become a convenient whipping boy. . Why do you think only one credit reporting agency has stated that they will allow FICO 08' to be applied to their data? [/quote] Who says they have a choice or a say in what FICO does with their data? What law prevents FICO from doing as it pleases? Not necessarily! Competition you know.
Well, September is not over yet, and I don't think there will be a huge announcement that a score is from the "new" model. My guess is that the new model will be slipped in very quietly, and only a few astute consumers will notice the difference. No one can truly decipher the FICO scoring model, and score changes, so how will anyone be certain a score change was due solely to an AU account not being counted in their score?
Seems to me that the point made is that you are looking at the situation from the standpoint of why your business will survive. Looking for reasons why they can't effectively put you and others out of the authorized user business. The suggestion seems to be that maybe you should take the contrarian position and ask yourself how they can put you out of the authorized user business. The next valid point made was what can the 3 majors do about it in the event that FICO decides to make the suggested modifications? If FICO is a totally independent entity then it can do as it pleases with the data it reports on. If it makes an unwise decision then it will suffer the consequences. I'm at least reasonably certain that your business has taken a major setback the last few months and if so you probably feel that the setback is due to all the negative publicity that has been aired of late but most businesses are hurting these days. You may even be reduced to following the lead of one of your competitors who is offering to "loan" money in large amounts if you will only pay them a big fee for their time and trouble to report your payments as being on time for the next 12 months. They will gladly report you as paying on time for as many accounts as you can afford to pay them to report you for. Their web site even says one should hurry up and get their authorized user bundle before the new changes take place in September. Never mind the fact that if the proposed changes do take place the result would be a significant sum of money down the drain. Of course, what is going to be even more interesting is how they will prove they have suffered $5 million in damages as a result of what the credit bureaus and the debt collectors have done to them.
If our company is reduced to selling "borrower" tradelines than I will personally begin practicing law on a full-time basis. And yes . . . that will be a reduction in income. With that said, no question that we would suffer an income decrease if FICO 08' were to be adopted however, we would not engage in outright fradulent activity such as reporting false tradelines. For the gentlemen who inquired as to how FICO 08' was illegal, please reference our site or simply search this board. I've espoused our theory numerous times.
Then I suggest that you start boning up on your bankruptcy law quickly and add that to your mix of products ASAP. I don't suggest that to be funny but rather because bankruptcy filings jumped 34% in August alone according to one reliable source. Those numbers will take another dramatic rise this month and for the next several months before things start tapering off. Mortgage foreclosures are also rising astronomically every month and that trend won't level off until at least mid summer '08 at the earliest. By that time we will be in the midst of the '08 elections and the uncertainty and fear about who will be our next President and what the upcoming economic and miltary policies will be. That will throw business and the economy into yet another tail spin which usually lasts anywhere from a year to 18 months. So if we think we are in bad straits now just wait and it will probably get worse. People are now far more worried about getting to the bankruptcy court to get burned again rather than taking positive steps to resolve their problems. And I for one never thought you would.
FICO '08 will happen..... I have to disagree that FICO '08 will never happen, with all of the mess of the subprime mortgage market, somethings had to be done. I am sure that the Sep '07 rollout was a target date, and like any product launch and introduction, the "bugs" are being worked out. The scoring algorithm is so complex, one "criteria" cannot be simply "pulled out". I don't think anyone is scared to use the new model, most likely they are looking for a confidence factor level in its predictability rate. No offense apexcrsrv, but once the (legal) practice of selling "AU tradelines" became an industry, it did skew the overall scoring accuracy. With the plethora of marginal mortgages written, and based upon credit scores for the most part, there had to be fallout. All this has done is shown a weakness in the model, that would have been nearly impossible to predict or forecast. Now, the model is being addressed for these contigencies. Those that have made their money in selling "AU accounts" should be pleased with the opportunity for as long as it lasted. It is too bad that the intent of the AU status will suffer, but in the pursuit of "fair and accurate reporting, reality says this practice could not have lasted.
And exactly what was the "intent" of authorized user accounts? I don't think this was ever clear but, it no context should it be argued that the purpose was to raise anyone's credit scores. I'll admit that we do not follow the "intent" for authorized users however, it is legal and it does work. So long as it continues to work, we're going to offer it. What most people miss is that this is a viable weapon for savy consumers. The FICO scoring model and credit scores as a whole are meant for businesses to make money. Plain and simple. We offer a means for consumers to save money in the long term and to get into mortgages. I will not apologize for that. And . . . we sell these things for far less than any other company. Sure, we make some money but, I can tell you now, people make money off us too. It is a win-win in that respect. At the end of the day though the real question is who is going to actually use FICO 08'?
I have to agree with you that the method is absolutely legal under ECOA. There can be no other conclusion the way it is worded. On the other hand it is a federal felony offense for someone to use that in an attempt to artificially raise their credit scores and then obtain credit they would otherwise not have qualified for. It is the same exact situation as is the case for the seller of guns or ammunition. It is not illegal for them to sell guns or ammo but it certainly would be an unethical thing for the seller of a gun to sell it to a person who announced that they were going to use the weapon to go kill another person or to rob a bank or other place of business. The seller should warn the purchaser that if he uses the product in an illegal manner he may end up in serious trouble. Another similiarity is that it is not illegal to sell alcoholic beverages but selling them to a person who is already overly intoxicated is illegal in most states. In short, although it may not be illegal to sell something there is at least a moral responsibility to warn the purchaser that the intended use of the product could lead to serious legal problems. I tend to think that a disclaimer should be posted at a bare minimum. I don't think that is going to be a question. Lenders can always be counted on to use any product, service or weapon that is highly touted as capable of serving their needs and desires or being of some benefit to them. They won't look the horse in the mouth to see if it has any bad molars in there. Your customers don't and neither will they. Lenders are just as gullible as anybody else. They aren't going to look at ECOA and perceive that they could end up in serious legal problems the way you have done. ECOA won't even cross their minds. Even if their lawyers think of it and attempt to warn them they will not be likely to heed the warnings because they will not believe that any consumer would think to sue them for the violations. Fair Isaac might think of it but probably won't worry about the consequences because like you, the profit they will make from it will far outweigh the small chance a winning lawsuit might be lodged against them for implementing it. The second and probably most serious hurdle such a lawsuit would have to jump is proving that the score drop was due to their having had their score artificially elevated by becoming an authorized user on someone else's credit cards. Even if they could prove that they would then have admitted that they had artificially elevated their scores and that would just about kill their chance of success. That fact would come out in discovery and it would be all over.
In this case, probably the latter. However I maintain that lenders are just as greedy and often even more naive than I So are government officials. They will grab at any solution if it appears to have the potential to explain their predicament of the moment and will jump at any conclusion or opportunity to push the blame off on somebody else for their own poor judgment. There is no way that anyone can convince me that the authorized user game has been played to such an extent that it has caused the present debacle of failed mortgages and bankruptcy that hasn't even begun to hit it's apex yet. A few hundred thousand maybe but we are talking millions of bankruptcies and another few million foreclosures. There is no way that people taking advantage of the AU loophole is the cause of all that. But if the lenders can use it as their whipping post they will do so. And if FICO can convince enough of them that this is their cure then they will probably buy it hook line and sinker.
