My Reference: Fair Isaac

Posted by Sean on June 08, 1999 at 12:36:19:

In Reply to: Accurate Information. No, really, I mean accurate. posted by Greg Fisher on June 08, 1999 at 10:47:03:

The source you site (creditscoring.com) is notorious for spreading poor information and for slanting everything it has to say against scoring. It claims that scoring is discriminatory, that it punishes people for shopping for credit, etc.

All the information I get comes directly from the source. I read the fairisaac site regularly and have spoken directly with representatives from Fair, Isaac and Company about scoring issues that affect me personally.

Read the following article, if you wish:

http://www.fairisaac.com/servlet/SiteDriver/Content/795

QUOTE:

t's often difficult to convince people they need to think about the concepts behind the credit assessment in light of overall numbers instead of individual people. But risk-based pricing by definition is relying on large numbers. The idea in risk-based pricing is that those, hypothetically, at a score of 680 pose twice the risk (one out of 11 will default) as those who score 710 (one out of 21 will default). Thus, the pricing rationale is that those who score 680 should pay a higher interest rate or other fees than those who score 710, to compensate for that risk. To implement risk-based pricing one does need an effective ranking tool-but the fact that two models would rank individuals in a different order has no bearing on effectiveness.

END QUOTE.

A person with a FICO score of 680 has a statistically determined rate of default of 1 in 11. That means 10 performing loans for every one non-performing loan.

Now if you have on your credit report 4 charge-offs and 4 paid credit cards, what's your chance of scoring 680? I think we can all agree that your chance is very small. Even if your debt ratios, number of inquiries, number of revolving accounts, etc. are PERFECT you will probably get a score that indicates a default rate of 50 percent. Admittedly we are discounting the age of the accounts, and it is true that the older a charge-off gets the less it affects a person's score, but in this case the charge-offs are less than 1 year old.

Similar logic will tell you that if you need a score of 710 you will need 20 performing loans for every non-performing loan on your credit report. This is extremely difficult to do and your best shot of getting 710+ is to have NO non-performing loans on your report at all.

The most reliable source for information on Fair, Isaac and Company credit reporting can be found directly on the fair isaac site.

• Fair, Isaac & Company

Follow Ups:

• Issue 1: "It claims that scoring is discriminatory..." Greg Fisher 08:50:10 6/11/99 (2)
  • Silence Implies Consent Sean 09:46:27 6/11/99 (1)
    • Now that that is resolved, cease making false claims about me. Greg Fisher 09:20:41 6/12/99 (0)
• That's proof of something (but not of your statement). Greg Fisher 22:23:13 6/09/99 (12)
  • Proprietary Sean 09:35:05 6/11/99 (3)
    • Your true colors: "... I'd not only sue... I'd go there with a pump shotgun and mow people down." Greg Fisher 10:28:19 6/12/99 (2)
      • Let me see... Sean 09:02:05 6/14/99 (1)
        • Pay attention. Greg Fisher 09:54:08 6/15/99 (0)
  • Credit Scoring Sean 10:48:38 6/10/99 (7)
    • Re: Credit Scoring Greg Fisher 08:33:06 6/11/99 (4)
      • Seeing Through the Spin Sean 09:11:57 6/11/99 (3)
        • I can see I'm going to have to break this down even more for you. Greg Fisher 09:37:24 6/12/99 (2)
          • Your Questions are Disingenious Sean 09:49:14 6/14/99 (1)
            • Your answers are guesses, and you are losing track of what you said. Greg Fisher 02:33:46 6/19/99 (0)
    • Can't we all just get along? Alaska is calling .... Christine Baker 16:47:52 6/10/99 (1)
      • Re: Can't we all just get along? Alaska is calling .... Sean 10:09:31 6/11/99 (0)

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Subject : 

Comments:
: The source you site (creditscoring.com) is notorious for spreading poor information and for slanting everything it has to say against scoring.  It claims that scoring is discriminatory, that it punishes people for shopping for credit, etc.

: All the information I get comes directly from the source.  I read the fairisaac site regularly and have spoken directly with representatives from Fair, Isaac and Company about scoring issues that affect me personally.

: Read the following article, if you wish:

: http://www.fairisaac.com/servlet/SiteDriver/Content/795

: QUOTE: 

: t's often difficult to convince people they need to think about the concepts behind the credit assessment in light of overall numbers instead of individual people. But risk-based pricing by definition is relying on large numbers. The idea in risk-based pricing is that those, hypothetically, at a score of 680 pose twice the risk (one out of 11 will default) as those who score 710 (one out of 21 will default). Thus, the pricing rationale is that those who score 680 should pay a higher interest rate or other fees than those who score 710, to compensate for that risk. To implement risk-based pricing one does need an effective ranking tool-but the fact that two models would rank individuals in a different order has no bearing on effectiveness.

: END QUOTE.

: A person with a FICO score of 680 has a statistically determined rate of default of 1 in 11.  That means 10 performing loans for every one non-performing loan.

: Now if you have on your credit report 4 charge-offs and 4 paid credit cards, what's your chance of scoring 680?  I think we can all agree that your chance is very small.  Even if your debt ratios, number of inquiries, number of revolving accounts, etc. are PERFECT you will probably get a score that indicates a default rate of 50 percent.  Admittedly we are discounting the age of the accounts, and it is true that the older a charge-off gets the less it affects a person's score, but in this case the charge-offs are less than 1 year old.

: Similar logic will tell you that if you need a score of 710 you will need 20 performing loans for every non-performing loan on your credit report.  This is extremely difficult to do and your best shot of getting 710+ is to have NO non-performing loans on your report at all.

: The most reliable source for information on Fair, Isaac and Company credit reporting can be found directly on the fair isaac site.


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