Anyone else think the algorithm is wrong???

[Kforce]

---

@Brian_Earl_Spilner wrote:

---

Now, is it fair? I don't think so. I just finished a 7 year rebuild meaning I went 7 years since my last derogatory, but was penalized until the end. I also don't like the fact that paying my chargeoffs and collections still hurt me more than a bankruptcy. I fulfilled my obligations, people who filed bankruptcy did not.

I agree this is not fair

Having said all that, the score is just a number and doesn't dictate likelihood of approval. Lenders will always use their own criteria for approvals.  I've always been an outlier and able to get approved for things my scores say I shouldn't. It also goes the other way. Cap1 is not friendly to people with 800+ scores.  I use it as just a guideline and to quickly verify nothing is wrong. If I see my score drop 30 points, I know there's something that needs my attention. Otherwise, I don't bother checking it before an app as the lender will either approve me, or they won't. 

I believe many worry way to much about score.

Agree 100%

---

[Thomas_Thumb]

---

@AlgorithmIsWrong wrote:

Prediction is pretty much an opinion in my eyes and peoples credit worthiness should not be  judged based on an opinion.  If one late payment hurts you by 20+ points when all your prior payments were on time, one would take into account all the positive history and slightly ding the person for a late payment. Key word there is "slightly."   Now, if the late payments continue, then sure, I could understand the huge decline.  This is why the system is flawed.  

Perhaps, delayed reporting from agencies to the bureaus is warranted.  Where a 3 to 6 month period is scored rather than individual months.

---

Twenty points is a trivial decline. A huge decline is 120 points or more -IMO. A single 30+ day late is bad and indicates increased risk. An extended late 60+ or multiple lates represent greater risk and a 90+ day late is a red flag.

Recent Fico algorithms have already been tweaked to mute the impact of derogatories. Thus, the inflation of scores in recent years.

Data shows strong correlation between risk of future derogatories and presence of lates. The impact of lates on score does decline over time and the reduced risk assessment is backed by data.

Bottom line - the scoring algorithms are data driven and are not based on opinion. Issues such as paid vs unpaid collections as well as medical debt have been addressed in recent models. Paid = lower risk to lenders.

[Thomas_Thumb]

---

@Brian_Earl_Spilner wrote:
Lenders will always use their own criteria for approvals.  I've always been an outlier and able to get approved for things my scores say I shouldn't. It also goes the other way. Cap1 is not friendly to people with 800+ scores. 

Doom!?

Will my Discover card CL be slashed when Cap One takes over? Will my card be cancelled?

---

[Horseshoez]

---

@Thomas_Thumb wrote:

---

Bottom line - the scoring algorithms are data driven and are not based on opinion. Issues such as paid vs unpaid collections as well as medical debt have been addressed in recent models. Paid = lower risk to lenders.

---

You beat me to it; when it comes to assembling the tables for credit scoring based upon millions and billions of bits of actuarial data, there is literally zero "opinion" involved.  @AlgorithmIsWrong, you are welcome to your opinion, however, you missed the mark by a wide margin. 

[ThomasJNewton]

---

@AlgorithmIsWrong wrote:

Prediction is pretty much an opinion in my eyes and peoples credit worthiness should not be judged based on an opinion.

Sorry, it is not an opinion, but the result of statistical analysis of millions of records. FICO finds groups of profiles that are similar and have defaulted, then they go back to the period they defaulted and find profiles that are similar but did not default and look for differences. Those differences are the basis of their models.

If one late payment hurts you by 20+ points when all your prior payments were on time, one would take into account all the positive history and slightly ding the person for a late payment.

You act as if this is a value judgement. It is not. It is simply an observation that people whose profile looks like the one in question have a certain percentage greater chance of defaulting after a 30-day late. If it really is a simple problem (your bank merged and so your account number changed causing your autopay to fail), your credit card company will often remove it as a courtesy.

Key word there is "slightly." Now, if the late payments continue, then sure, I could understand the huge decline. This is why the system is flawed.

You feel it is not a big deal, and so you should not take a big hit. Unfortunately, statistics show something else. The system's problem is that it knows nothing about why something happened, only that it did. There are a million reasons that a payment was missed, some of which having nothing to do with financial stress. Unfortunately, there is no way for a fully automated system to take those into account, as it cannot know enough about you to know what the issue was. The entity that can take those things into account is your credit issuer. That is why they can do courtesy deletes.

Perhaps, delayed reporting from agencies to the bureaus is warranted.  Where a 3 to 6 month period is scored rather than individual months.

First, many issuers already delay thirty days (if you miss a payment date, they do not report it until it is 30 days late). Second, payment history is taken into account in their models. If one has 10 cards with perfect 10 year payment histories, and one that has a 30 day late on it,  one's score will be higher than someone with many lates. I am not sure how you think they are scoring individual months. They score one's aggregate behavior over time for things like payments. What they do not do is score trended data for balances and  utilization. 

[Horseshoez]

I get the feeling @AlgorithmIsWrong was just here for a fly-by rant and we won't be hearing from this individual again.

[tricie17]

I for one believes that the system is flawed. The guidance given to the Bureaus I doubt is read correctly. I mean after all if I get a credit card, my longevity goes down but if I don't get a credit card, I do not have enough credit-who made this mess up. The Bureaus are so busy creating their own portfolio that your credit gets information that do not even belong to you or it is wrong altogether. FICO only gets to accept the flawed information from each of the three Bureaus which does not make things better. CFPB is so overloaded with crap messes that is placed incorrectly on reports and the investigation starts with (sent back to) the company reporting the wrong information in the first place. I could go on and on. It is all a catch 22 program. Oh and I forgot to mention that there are so many secondary companies with access to your credit that it becomes a markery.

[Horseshoez]

---

@tricie17 wrote:

I for one believes that the system is flawed. The guidance given to the Bureaus I doubt is read correctly. I mean after all if I get a credit card, my longevity goes down but if I don't get a credit card, I do not have enough credit-who made this mess up. The Bureaus are so busy creating their own portfolio that your credit gets information that do not even belong to you or it is wrong altogether. FICO only gets to accept the flawed information from each of the three Bureaus which does not make things better. CFPB is so overloaded with crap messes that is placed incorrectly on reports and the investigation starts with (sent back to) the company reporting the wrong information in the first place. I could go on and on. It is all a catch 22 program. Oh and I forgot to mention that there are so many secondary companies with access to your credit that it becomes a markery.

---

I have a tin-foil hat I'd like to sell you.

[FicoMike0]

My sympathy to the op and his pain.  That said, since the whole purpose of fico score is to predict being late, is anyone really surprised that it responds to (drumroll) being late?

[CorpCrMgr1]

@tricie17 well said!