I've always been bothered with with a couple of things with the way scores are calculated. 1) The whole thing is based upon the idea that past performance will predict the future. The number one reason that people declare bankruptcy is because of medical bills, something that can't generally be predicted. If someone doesn't pay their bills because they are credit junkies, then that's one thing. But somone who loses their job or has huge medical expenses falls into a completely different category. 2) There is no accounting for income in any of their formulas. If I have a credit card with a $10,000 limit and run it up to the max, the risk is much greater if I make $25,000/year versus if I make $100,000/year. 3) They do not track if you pay your bill off every month. Considering all of the tiny things they track to come up with your score (length of residence, time on job, etc.) I think that paying your bill off every month would be a significant predictor of your risk. Just my thoughts.....
These scores are definitely messed up. I'm not complaining because of my score which is ok, but I don't think debt ratios should be more important than a perfect payment record over several years.
I was so frustrated about what I originally knew about the FICO scoring system that I called Fair, Isaac and Company, Inc. I believe that you can get the same brochure that they sent me (all 20 pages of it), off of their website www.myfico.com and/or www.fairisaac.com If it makes you feel any better, here is an excerpt from the brochure. Lenders know that your FICO is only based on information in your credit report. They also look at your income, job history, and the kind of credit that you are requesting. For some people, a given factor may be more important than for someone else with a different credit history. How a Score Breaks Down: Payment History 35% Amounts Owed 35% Types of Credit in Use 10% New Credit 10% Length of Credit History 15% HoustonGuy, I don't know if you've already applied for your loan, but, being a Real Estate Consultant and a licensed Realtor, I like to tell my clients to make sure that after they have of course, already finished with their credit reports and are ready to apply for their loan, to call all of their current creditors and have them update their accounts on their credit files. Some creditors don't update every month and this can have a HUGE inpact on your score.
1*This is a lie and Joe Consumer has bought it hook line and sinker. The truth is it's a con game to milk folks our of their hard earned money. 2*This just reinforces 1 above. 3*It's not a predictor of if you will bleed but a tool to suck all the blood they can get.
I disagree with the general feeling of this thread that it's not fair that they use past performance to project future performance. What else do the creditors have to go on? i despise the CRAs as much as anyone but, really, when you think about it - the only thing a potential creditor has to judge you on is your past performance. I don't see any other way - does anyone else?
I have 24 years of PERFECT payments...HOW CAN I LOGICALLY BE DENIED...it happens all the time...(if you go by past history).
This is what I can't understand about FICO-- It has to do with income and resources. Some Amex Centurian member makes over 3 million dollars per year. She charges 30,000 to 40,000 per month on her card and (of course) always pays it off in full each month. Because of the system, will she have a lower FICO then the retired Grandma on a fixed income who has over 30 years perfect credit history, but only makes 12K a year and keeps her debt under 100 dollars? Really?? Unfortunately, although I have made it a project to talk as many friends as possible into letting me see their scores so that I can compare actual empirical data, I don't have any friends in the 3 Million/year bracket who will let me see their reports And another thing: You know how even small pay-downs of credit cards can result in point increases? How come paying off mortgages doesn't budge the score at all? I know someone who pays an additional $1300/month on her mortgage and the score doesn't move. And why does the scoring system seem to change every month? Why, one month, does paying off 2K result in a huge point increase and another month, hardly at all? (Even with similar ratios) I personally think that Equifax is the most whacky, and has the most variation (random point generation qualities). Ex and TU *seem* more consistent (although that is damning with faint praise) Anybody agree/disagree? Calypso
As much as I hate to say it, just like we try and bend the system to our favor, so the credit companies try and bend it to their favor. Do you think that Capital One doesn't report credit lines because they don't know how? I'm sure it's because they know it can hurt your ratios and force down the score. Capital One is an odd company to begin with. I've had a card with them for almost two years, they regularly do an account review on my credit report but they have never asked me how much I make. Truly a company that is ONLY using FICO to assign credit lines. Contrast that with Citibank. A number of people on here have mentioned that they've been declined by Citi even though their credit is reasonably good. Other people whose scores have been weaker have been approved for decent sized credit lines. Clearly, they are using FICO as just one piece of the equation. I'm sure another big part of the whole scoring system is that creditors have enough trouble keeping just the few pieces they do report, accurate. If you think about it, all they really report every month is credit line, balance and did you pay on time. They get that wrong often enough that you wonder if they would be able to handle all kinds of other factors. Of course, maybe they really have no incentive to do better.
I just thought of something else.... We all have to remember that your credit report is a snapshot in time. If it says that you owe $1,000 on credit card A, it doesn't say that you owed $2,000 last month and $3,000 the month before. If FICO has proven that how long you've been living in your home is an indicator of risk, then I consider how fast you pay down your credit cards to be significant also. Has anyone heard of plans to capture more information in our credit reports? I doubt it but thought I would ask.
The whole system sucks, IMHO. In my previous post, I stated how I had great credit prior to a medical setback. I was forced to make choices. keep a roof over my head, eat and continue to have insurance or pay my credit card debt to continue to have great credit. Having an 800 score, but living on the street and limited income, does not benefit me. Could have credit cards with good rates, a great mortage, but paying for it, was difficult. So I stopped paying the credit cards, but only after I came to that conclusion. I made the mistake of paying sporatically and making the last DOLA extend. Why? cause I was scared of being sued, which I have been and they won, due to my ignorance and before coming to this board. So my past history gives a black mark on my credit report and claims that I have a higher percentage of doing this again. Like I planned this and planned to use this situation as a reason to get out of debt. I did not plan this, but was hoping for some breaks, be it lower the APR, freeze the account, something, let me pay till it was paid off. They would get their money, but not in two months either. So the one company that worked with me was paid in full. When I got the zero balance, they doubled my CL and kept my APR at 9%. The others chose to screw me and ended up charged off. Do I feel sorry for them? No. I tried to explain the sitution and tried to work it out with them. Yes, they are a business and expect to make money, which they would at their 23% interest alone. The simple fact that I maintained a roof over my head, paid rent on time, was never late should say something, since it takes up a great proportion of my salary. The only thing I think it says, is that I had my priorties wrong. Pay the darn credit card companies and collections, that are in the business to screw you.
Ibrown, I'm curious. . .Do you own any credit cards, yourself? I am just wondering. You may be "on" to something here. However, you need to elaborate on comments such as the ones you just made to give people an "out". Do you have a mortgage? Or did you pay cash? Surely you've purchased a vehicle in your life. How did you pay for it? Were you born with a proverbial "silver spoon" in your mouth? As much as we hate certain things. . . such is life. I hate the fact that we would end up paying over $200K on a $96K, 30-year mortgage! I don't know what your answers are to these questions, but what are people supposed to do? If they want to purchase a home, they "have" to have some sort of credit history. If not, they "rent" the rest of our lives. . .and talk about "throwing away" your money! What about the average young family who lives from paycheck to paycheck? Sometimes, credit cards are a necessary evil. Just a suggestion. . .when you make comments to people who are new to this board, please explain yourself a little more. Remember, we are new to this whole "credit" thing and we need to hear "why" you view things the way you do.
I feel the same way. I had to make a decision to either keep a roof over our heads (3 kids & I) and food on the table or pay my creditors about 5 yrs ago. Not that it was a hard decision but it made me feel horrible. I had never had a problem paying my bills but at that particular moment in time the creditors had to take a back seat. I would miss a payment then pay one payment the next month. By this time I was late 30 days, etc. It just began to snowball. My credit of course suffered. I received 4 chrgoffs and 2 collections. I have paid them all as of 3/2001 and I did purchase a home in 6/2001. Thank GOD!!! Anyway, I have said the same thing before, why didn't the fact that I paid rent on time matter? Of course, it doesn't report to the CRA. Now it stinks, 7 years ago I made HALF THE MONEY that I do now and could buy 2 new cars within 3 months with no problem. Now I have bought something but it was a headache. The score thing is mind boggling- I don't think it will ever get better. Heather B Credit Expert- 605 (4/02) FICO- 526 (2/02) EQ CreditXpert- 553 (4/02) E-Loan- 586 (4/02) TU- 562 (4/02)
Why have credit cards? Mainly cause you have to. I can't rent a car without one. I can't rent a hotel online for a vacation without one, many things you can't do or should I say find it very hard to do without a credit card. I did not default on my creidt card bills due to my NOT WANTING to pay and planning to screw the industry. I came upon hard times, like many others on this board and find that one bad time, can result into a snowball effect that affects us for the next 7-10 years. I do have a decent income, but my priorities are such that I provide for my family ( myself and child FIRST AND FOREMOST) with shelter, food and insurance, to which I consider very important. I do not use credit cards for everyday expenses and don;t have and never had many cards. But I realize having credit and good credit, no matter how the industry wants to rate me, is essential. The industry just wants to rate me on my past experience as an indicator of future risk.
In response to whatever, I agree totally with you when you say that your priorities lie with taking care of your family, that is the way it should be, BUT I do disagree that all of us are forced to use credit or credit cards. First debit cards which use the money from your checking account iterest free can be used in place of a credit card to rent cars, hotels. almost anything you use a credit card for, Remember not too long ago paying for things was the norm, Peolple very rarely used credit. Now I know the times have changed and credit is essential for people who want to buy a house , car , or any other big purchase, But it seems like we use our cards for lots of things we don't need to, and all it does is make the greedy credit card companies richer. This is just my opinion and I'm pretty sure many will disagree but i felt this point should be made. Thanks
I agree with you it is fair to use accurate and complete information however the information is far from accurate or complete.To add insult to injury scoring is based totally upon this false information and is used mainly to over charge us rather than an indication of credit worth.Another thing I have also noticed is that many things that lower your score are based on false interpretation or assumptions gleaned from the information. 2*Nothing:But the sad part is they're not getting a true picture of peoples past performance!
Sure, your credit report shows how much you owed last month and the month before. In surprising detail. Experian's online report will show you a little bit of this historical information but the version you get in the mail is even more detailed.
1*Let's quit calling the fico rip off a system.A fraud is a fraud is a fraud. 2*&3* More evidence the whole deal is a con game. 4*5*6*7*Even more evidence.
