You have probably heard that scoring systems grade you on the likelyhood the loan will be paid back. This is only partially accurate. Modern decision/scoring systems are designed to find the most profitable customers--not the most reliable. The most profitable customer is not the one who regularly pays off the balance and knows her legal rights. No indeed. Banking profits come from overdraft charges, late payment fees and sky high interest on revolving balances. The profitable customer is deeply in debt and ashamed to challenge overcharges for fear of incurring the wrath of creditors. Scoring systems are designed to find customers who are in this trap and keep milking them, then dump the account just before the victim is forced into bankruptcy. Being an intelligent consumer and managing your money wisely will put your credit score in the dump. Spending so much that you have to borrow to survive will go a long way toward improving your credit score (and destroying your life). If your score is low you are in good company. Often the best credit risks have the lowest scores. Take the hypothetical example of Bill Gate$. Microsoft, and presumably Bill, have no debt. His savings, investments and money owed to him do not count in credit bureau scoring. All the computer knows is that he isn't swimming in debt like everybody else and therefore assume he must be hiding something. Bills credit worthiness is further impaired by marrying later than those in his demographic group and thus he has committed the cardinal sin of acting differantly than expected. To a computer the worlds richest person is obviously a bad credit risk. Sorry Bill. You can't be trusted with a credit card or rental car
Your message goes to the extreme in describing the situation. But the notion is not entirely false. For example, one of the scoring models recently employed checks the consumer's credit file and tries to predict how likely this consumer is to close the account he's applying for, within the first six months. If the score indicates that he's indeed likely to do so, the lender would decline his application even if FICO is high. This consumer represents one who is likely to pay on time, and yet unlikely to generate sufficient revenue for the lender. Saar
Interesting Info Author: ShyGuy (216.104.228.151) Date: 04-08-01 16:03 You have probably heard that scoring systems grade you on the likelyhood the loan will be paid back. This is only partially accurate. Modern decision/scoring systems are designed to find the most profitable customers--not the most reliable. The most profitable customer is not the one who regularly pays off the balance and knows her legal rights. No indeed. Banking profits come from overdraft charges, late payment fees and sky high interest on revolving balances. The profitable customer is deeply in debt and ashamed to challenge overcharges for fear of incurring the wrath of creditors. Scoring systems are designed to find customers who are in this trap and keep milking them, then dump the account just before the victim is forced into bankruptcy. Being an intelligent consumer and managing your money wisely will put your credit score in the dump. Spending so much that you have to borrow to survive will go a long way toward improving your credit score (and destroying your life). If your score is low you are in good company. Often the best credit risks have the lowest scores. Take the hypothetical example of Bill Gate$. Microsoft, and presumably Bill, have no debt. His savings, investments and money owed to him do not count in credit bureau scoring. All the computer knows is that he isn't swimming in debt like everybody else and therefore assume he must be hiding something. Bills credit worthiness is further impaired by marrying later than those in his demographic group and thus he has committed the cardinal sin of acting differantly than expected. To a computer the worlds richest person is obviously a bad credit risk. Sorry Bill. You can't be trusted with a credit card or rental car Reply To Message Re: Interesting Info Author: Saar (proxy1.bezeqint.net) Date: 04-08-01 16:13 Your message goes to the extreme in describing the situation. But the notion is not entirely false. For example, one of the scoring models recently employed checks the consumer's credit file and tries to predict how likely this consumer is to close the account he's applying for, within the first six months. If the score indicates that he's indeed likely to do so, the lender would decline his application even if FICO is high. This consumer represents one who is likely to pay on time, and yet unlikely to generate sufficient revenue for the lender. Saar Reply To Messages ==========GOOD reasons to ban scores
