I am a new member. I have been browsing this forum for last 5 months, I belive this forum is one of the best place to find credit related information in the web. With this forum, I strongly belive many people will be benefited to get their credit improved. Also I want to say thank you for many active members who devote their time to answer repeated questions and share thoughts. Since we now can access credit score through Equifax and few other credit information services(even though their score is not precise), I came to think about credibility of scoring system. As I read from one of the post, there is tendency that emphasis is on debt balance ratio (or even amount) than payment history. What I found is as long as you do not have any negative item and too many inquiries, you can raise substantially your score in short period of time (as short as 1 or 2 month) by reducing revolving balance. I had score of 682 last month with $3,430 of balance and after reducing balance to $87 , my score is 7 19 this month. If this is the case, credit scoring system is not reflecting long term credit management ability, but financial status of certain point which can never be exact judgement for someone's credit history. I want hear your precious opinion.
The interesting thing about studying behavior (and that's what credit scoring tries to predict) is you get more accurate results if the subject you are studying does not know about the study. As long as the data in a particular person's credit file is accurate and that person isn't consciously aware of the credit scoring system I'd guess that that person's credit score is a very accurate predictor of future behavior. Most of us here probably mostly negate the power of the credit scoring system to predict our future behavior because we are aware we're being studied and we've found short term ways to alter our scores in our favor. I'd be willing to bet that if you took a random sample from this board and studied their credit behavior over the next 10-15 years you'd see that any short term predictions based on this year's credit score were inaccurate and probably unfairly biased towards creditworthiness. So, with the huge assumption that the average person's credit file is accurate I think the FICO scoring system is probably a pretty good predictor. For those of us who are paying close attention, it probably isn't. You know, I was still thinking about this after I posted it and I had to go back and edit my post to add this thought: I suppose if I really took my logic to its conclusion in this analysis it would be in FICO's best interest to lower a consumer's score the more he/she requested his/her report. I know the system says this doesn't happen, but I wonder...
According to FairIsaac.com "Credit scoring is one such tool. A credit bureau risk score â?? commonly known as a FICO score â?? is a snapshot of your credit risk picture at a particular point in time. Your FICO score changes over time. As your data changes at the credit reporting agency, so will any new score based on your credit report. So your FICO score from a month ago is probably not the same score a lender would get from the credit reporting agency today. Your score may be different at each of the three main credit reporting agencies. The FICO score from each credit reporting agency considers only the data in your credit report at that agency. If your current scores from the three credit reporting agencies are different, it's probably because the information those agencies have on you differs." Then someone with $10K on credit cards and $0 in the bank is different from someone with $10K on credit cards and $100K in the bank and the FICO system does not see that at all. Then lenders may consider this information, as may other types of scores (many lenders use their own scores as well), your salary, your occupation, title, employer, date employed or employment history, where you live, the interest rates being charged on your other accounts, your child/family support obligations, your rental agreements, etc. Chances are that FICO scores will be a huge factor in a lender's decision to approve your loan, mortgage, credit card but not all factors that are to be considered. Anyway, that's just my two cents on it =)
Your first argument was that FICO is less predictive of people who are more "score-conscious". I agree. But IMHO it does not follow that such people should have a lower score; It can be argued that score-conscious people are much less likely to default, since most times they're either building or re-building; Defaulting would be contrary to their objectives and to the general pattern of their behavior, as we'd normally expect them to try harder when it comes to timely repaying their debt. Saar
Yes, I agree that we are excellent short term risks, but what about the long term? How likely are we to keep up this level of interest in credit? How likely are we to return to previously established patterns? I think it's a fascinating question and I'd love to see some long term studies of people like us.
F.I.C.O. credibility??? Is this the JOKE OF THE DAY??? I HAVE A PERFECT PAYMENT HISTORY SINCE 1978, BUT I HAVE A LOW F.I.C.O. OF (690) BECAUSE IT LOOKS LIKE I NEVER PAY OFF MY ACCOUNTS (due to statement date reporting), EVEN THOUGH I PAY IN FULL MONTHLY, EVERY ACCOUNT THAT HAS AN INTEREST RATE >8.90%. I have teaser rates like 2.90%, 3.90%, 5.90%, etc. (they get paid off when they refuse to renew the rate and it sits there till they are willing to "deal"...OR I DUMP THEM!!!
--------------------- Student Athlete... ---------------------- MY COUSIN'S KID IS A 4.0 HONOR STUDENT/ATHLETE, SO NOT ALWAYS. F.I.C.O. IS A DIFFERENT MATTER...one inquiry is better than zero... ...two months at an address is better than 2 years... ...no trade lines is better than 6+... ...retired is better than 12 years on a job...
30% of FICO SCORE is Amounts owed and 35% of score is payment history, you could have perfect payment history and your score is a lot lower due to balances. Yes, paying down accounts is the fastest way to a higher score. Perfect pay and owing thousands will get you higher interests, rejected on new cards, etc. Banks now feel you are a RISK.
