Posted by John on January 24, 1999 at 11:52:34:
In Reply to: Fair Isaac, Corporate America and the FTC posted by Christine Baker on November 15, 1998 at 20:04:18:
I read Fair Iaasc's web site and I think they should be sued! They are posting misleading information. Actually it's completely FALSE information! And you are correct. These lenders are basing EVERYTHING on the credit scores ONLY! Even mortgage lenders that are giving loans for a mortgage. I have PERFECT credit! No lates or anything. My mortgage is with UC Lending. Guess what? They DON'T report their mortgage loans to the credit bureau's! You know what that means, right? A LOWER CREDIT SCORE! Having a mortgage showing up on your credit file accounts for a VERY large part of your credit score. Since they don't report to the credit bureau's anymore, I get a LOWER score!
Before I even got this loan through them I couldn't find a lender that would even LOOK at my credit UNLESS my credit score was at 660 or above. Even the mortgage broker I was using at the time couldn't believe how low my score was. He said I had PERFECT CREDIT! If anyone was ever getting cheated with there score it is you, he said. I asked him, how does my credit compare on the average with other credit reports you see? Based on my report, what would you guess my score should be? He said I should be up around 700 with my good credit.
So I asked him, why don't you talk to some of these lenders and explain something is wrong here and personally evaluate my application? He said he's tried in the past. It doesn't matter. If your score isn't at a minimum score, THEY WON'T EVEN LOOK AT IT! So now I get to go through life being treated as if I've been cloned into being the same as the average person. I'm a by product of a faulty computer program that says I'm at a higher risk than I should be. And those that do extend me credit charge me a higher interest rate as a result of this!
So here's what I've done sense then. I decided to become a loan processor in my spare time. I'm sicken when I pull these credit reports on people. When I compare them to each other it's just amazing how screwed up this credit scoring is! One person will have PERFECT CREDIT! The next one will have nothing but COLLECTIONS. But the credit scores are with-in 5 points from each other!
So now what I'm going to start doing is getting my customers to sign an authorization that will allow me to keep a copy of their credit file for my records. (which I already can do) But! I'm going to have them authorize to allow me to use their credit reports to build a case against Fair Isaac and possibly all the banks across the country. Fair Isaac will make the claim that the banks are the ones that determine the scoring system based on the particular programs the purchase from them. But Fair Isaac is the one that programs this crap! Plus I'll file suit against the big 3 credit reporting bureau's. It's their programs that spit out our credit scores through their bureau's. Which is purchased from Fair Isaac!
After compying all their false information from their web site and after I spend the next year or so compiling all these different credit reports I think I'll have put together one hell of a case! What do you think?
Here's one of the biggest problems I see with this scoring system. It treats everyone as a clone. It doesn't take into account what each inquiry was for. (by the way, after that loan broker I went to, he showed me my score. Then after I left there I went to another bank and had them pull my credit the same day, from the same bureau. My score dropped 13 points from having that one additional inquiry added on!) Here's the problem with inquiries. When ever the scoring system picks up on an inquiry it calculates it as just another inquiry where you were out applying for credit again. The computer doesn't know what the purpose of that inquiry was for so it treats it as if you were trying to get more credit. (Of course with all this technology we have with these computers, how hard can it be to program the system where the company making the inquiry punches in what that particular inquiry is for so the computer can know not to count it against you as another inquiry for more credit or count against you when that inquiry doesn't show up as an approved account opened?) What about people that are self employeed? They deal with creditors through their businesses. The companies that pull inquiries for business purposes won't show up as approved accounts when a creditor for your business checks your credit. It may be a company checking your credit for the purpose of extending you a 30 billing. Not an actual line of credit. And the ones that do open a line of credit for business purposes won't show up as an open credit account because they don't report business accounts to the credit bureau's and the credit bureau's don't report business accounts on your personal credit file. But those inquiries show up and get treated as if you were denied credit and are running all over town applying for credit and making it look like you have been denied by everyone.
Then you got mortgage lenders like UC Lending that no longer reports to the credit bureau's on how you pay your mortgage payments. So now if you have a mortgage but it's not being reported your score will be lower because of it.
Then the score judges you by the number of open credit card accounts, the balances on your credit cards and if you bought furniture or something on credit, they usually go through a finance company. If you have a finance company on your credit file the scoring system knocks of MAJOR POINTS for that. Your treated as a higher risk since you had to resort to using a finance company. They assume that the reason you used them was because you couldn't get financing from a bank. But furniture stores don't normally go through banks, they go through finance companies and MOST people finance the purchase of their furniture for their home.
You got to admit though, the way they score you on your credit cards is got to be the biggest joke of all. If you have more than 3 major credit cards your docked points. If you have high balances owing on the credit cards your docked points. If you have 0 balances on your credit cards your docked points. The ideal spot to be in is have no more than 3 major credit cards, keep your balance owing at 25% of your credit limit and you will get the highest credit score in the credit card catagory. But isn't that what the bank gives you a certain credit limit for, to use it? They will ALL send you a card with a certain limit. Then when you use that limit they turn around and deny you credit for another card and some banks will now close your account for running up your limit. Why don't they just set a smaller limit then if they're going to hold it against you for using all the credit they extend you? Go back 10 years ago and the more credit cards you had and the more you owed on them the more the banks would keep sending you more cards to charge up. Now it's the reverse. Why is that? Because the banks lost so much money on them after all these people maxed out their cards and filed bankruptcy! The banks created the problem and now they're going to rely on a scoring system to prevent it or at least cut it down and limit their losses because they can't rely on the idiots they hire to properly read a credit report. So now they let a computer do it.
But here's where their flaw in the scoring system based on the number and balances people have on credit cards is. The credit bureau's don't know a thing about each persons personal financial strength. You can have 5 credits cards maxed out at $5k each and your going to get scored the same as if you were making $20k and or if you where making $500k a year. It doesn't matter because the scoring system and the credit bureau's don't have this information on you.
Then what about some of the people that max out their cards every month but pay the balance off each month when the bill comes in? The credit bureau doesn't know this because the banks report once a month if that. Some report once every 3 months. So when ever an inquiry is pulled those people will be scored as always having a maxed out credit card when they really don't because they pay it off every month. But the credit bureau can't keep track of that since these people are using their credit cards every day instead of using cash or writing checks.
I remember this one time I was denied credit. I called the bank to find out why? Well the first thing they tell you is because of information on your credit report. So I asked, what information? I have PERFECT credit! He said I would need to get a copy of my credit to see for myself. Ok, I have a copy in front of me, so what's the problem? So he pulls up my file they have in their system. He say's you have high balances on your credit cards. I said, yeah, and? Well we can't give you credit because of that. And why is that? Did you look over my credit application at all? Sure we did. Well did you happen to notice what it say's my income is? So he looks and say's, is that $30k a year? Um, no, I believe it has a few more zeros in there if you look just a little harder. LOL. Then I explain to him. If you were to add up ALL my debts showing on my credit report and compare that to my income, not only does it show ALL my bills are paid on time, but you would be able to see that even though I show high balances on my credit cards and even if you add in my mortgage payment that I listed on my credit application, because it doesn't show on my credit file, but when you account for EVERYTHING, you will notice that ALL that debt I have represents 18% of my annual income. So what difference does it make if my credit card debt is high or not when it's still only 18% of my annual income? Do you know how many people can say that? Not very many. In fact, MOST people that get a mortgage will be in debt for 5 times their annual income and that doesn't include car payments, credit cards, and any other debts they may have! I could pay my house off with 6 months of my income. How many credit card holders do you have that can say that? He said probably none.
So then he comes up with this off the wall statement. He say's, but you also have to much available credit. I said, WHAT? Where do you see that? He say's you have about $200k in available credit. So you could run out and use up all that credit and then you would have to much debt, so I can't approve this based on that. Where in the hell do you see all that available credit at? Man, if I had that much credit available I wouldn't need your little credit card would I? He said, well that's your credit report is showing. It is? Wow! Who gave me all that credit? Well your going to have to go get an up dated copy oif your credit report because I can't give that information out over the phone. Ok, I'll go get another copy because I can't imagine who the Santa Claus is that gave me all that credit.
So I go down and get a recent copy of my credit report. But it looks the same as the last one I got 2 weeks ago, no changes, no $200k in available credit. So now I'm stumped. What the heck did this idiot see on my report that shows $200k in available credit? So I'm looking over my report again. Studying the hell out of it. Then it hits me! I decided to add up all the credit I had in the past that was paid off and the accounts were closed. They were installment accounts, so once you pay those off the account is closed and marked paid. Yep, that was it! This IDIOT added up all my old accounts that were paid and it totaled up to around $200k in credit that I had borrowed and paid off over my life time. But they were paid accounts, not open revolving accounts where I could go out tomorrow and run up more debt! WHAT AN IDIOT!
This is why lenders are using the credit scoring system today. Because they got a bunch of morons that can't read a credit report! In the past they had idiots like this guy is that were approving credit for people that should have never been approved. As a result the banks were loosing millions! So now everyone is treated as a whole instead of being treated as an idividual. And THAT'S where this credit scoring system is discriminating against most people.
Unless the credit bureau's obtain ALL of a persons financial information, their net worth, annual income, wheteher they work a job or are self employeed, what each inquiry is for so the system can not count inquiries that were for other purposes than personal credit, whether they actual have a mortgage or not since some mortgage lenders don't report to the credit bureau's, whether that person is paying off their credit card balances each month or not, etc, etc, etc. Then this scoring system CAN NOT EVER treat all the people fairly when they compute a credit score on them!
I think if there's enough documentation compiled on this discriminating system, there would be plenty of grounds to drag Fair Isaac, the credit bureau's, and all the big banks into court with a MAJOR class action lawsuit! Of course if it's a class action suit, the attorney's will get all the money if there was a settlement, but that would be ok by me as long as it gets rid of this scoring system or at the very least make the credit bureau's have to break down all the important information on each person and have Fair Isaac re-program their systems to treat each person as an idividual and not as a whole by evaluating each person based on their particular circumstances! Otherwise this is just going to keep getting worse before it ever gets better for a lot of people.
I understand that this scoring system has been working for these banks as an over all picture Vs. the old way of letting their idiot employees evaluate credit applications. They even admit that this system will sometimes treat some people in a bad way, but since it's been working for them on an over all average, it's a better system for them. That in my mind is discrimanated against some people and they are being victimized as a result. They either get denied credit when they shouldn't have or they get penalized with paying higher interest rates when they should be paying a lower rate. When that happens to someone as a result of their credit score based on the way the scoring system works today, then that is discrimination!
That's why Fair Isaac and the credit bureau's are fighting to keep us from knowing how their formula works. Because if everyone new the formula they would be buried in so many lawsuits for discrimination and the excessive interest rates people had to pay because of it, they would all be out of business and bankrupt!