Blood sucking not cream skimming -- a scoring consultant's industry insights

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: I received the E-mail below in September 98.  Have to add that we got both:

: Blood sucking (high rates and fees) AND cream skimming (lowest rates.)  

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: Christine,

: I've read most of your site and the information you provide is top notch. I used to work as a consultant to a large consumer leasing company where I assisted in the development of credit scoring programs. On your FICO scoring page you complain that scores change from day to day even though the report remains the same. There are two likely reasons for this. Scores may be based in part on internal data which is not disclosed on the report, and as items age their effect on the score changes causing a set of data to be evaluated differently a two different points in time.

: Twisted as this may seem, the only thing worse for a finance company than a customer with chargeoffs is a customer perfect credit. A customer who pays all their bills on time, and God forbid even early, is at best a breakeven customer. Should they be conscientious about their accounts and talk to customer service to dispute minor errors or check their balance they're costing the lender serious money. Finance companies depend on late fees and other charges for profits.

: The profile of the best (most profitable) customer is the customer who is at 80% or above on all their revolving lines, has 8-12 inquiries and 2-4 over 30 delinquencies in the last two years, and no over 60 or chargeoffs. These are the people who really try to pay their bills and would use bankruptcy truly as a last resort. Lenders can nail them for a high rate because they're desperate and afraid to comparison shop, and you're just about guaranteed a couple of late fees a year.

: Keep up the good work.


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