Credit scores oh dear !!

JimmyTheWig

Fireflyaway wrote: »

Of course lenders need to establish risk so why would they not see it and consider it. If I tell a mortgage lender 'just give me a mortgage, don't check my score because its mythical and means nothing' we all know what would happen.

I've taste-tested all the chocolate bars in the UK and given them a rating between 0 and 999. (*)
Chocolate manufacturers can log onto my website. For a small fee they can see their rating. For a hefty monthly fee I will tell them how I think they can improve their rating.
Incidentally, I'm not keen on dark chocolate. The milkier the better, in my opinion - which is obviously reflected in the ratings I give.

When you go to the shop for chocolate, why would you not look up my ratings and consider them?
If the shopkeeper says "Don't look up the rating it means nothing, just have this bar of chocolate" what would you say?

I'm guessing that (a) you wouldn't look up the rating because it's meaningless (e.g. you might like dark chocolate) but also (b) you wouldn't just buy what the shopkeeper randomly suggested either. You'd look at the available information (e.g. cacoa content) along with your past experience of eating chocolate bars and decide for yourself.


It's the same with credit. The score a credit reference agency gives you is pretty meaningless. But the information they hold about you (e.g. number of credit cards you have, how often you use your overdraft) is of vital importance to lenders.


(*) I haven't, by the way!

meer53

There are enough examples on this forum of people with "excellent" credit scores being declined for products, the "credit score" is meaningless, what matters is whats on the credit file. It pays to check your credit file information, NOT whatever score they give you. The score is an indication of whats on your file, so it's useful to consumers from that point of view, but meaningless to a lender.

SeanG79

OK. I work in credit and a few things to note.

1. Lenders do not use the Experian/Equifax/Call Credit Score in most cases, some do take this score into account (the score alone however will not result in an acceptance/decline). In all cases lenders create their own score based on information in the credit report.

2. The lender cannot see the same detail as you get on your own report. For example they will see a credit search "application for credit" but will not know precisely which lender/company performed the search.

3. I have known individuals with a perfect credit score with a CRA be declined for credit and a person with a "Very Poor" credit score be approved for credit.

4. CRA's generally base their scores on information pertaining to the last 12 months, whilst lenders generally focus the last 36 months (the caveat being defaults and CCJ's).

GingerBob_3

SeanG79 wrote: »

OK. I work in credit and a few things to note.

1. Lenders do not use the Experian/Equifax/Call Credit Score in most cases, some do take this score into account (the score alone however will not result in an acceptance/decline). In all cases lenders create their own score based on information in the credit report.

2. The lender cannot see the same detail as you get on your own report. For example they will see a credit search "application for credit" but will not know precisely which lender/company performed the search.

3. I have known individuals with a perfect credit score with a CRA be declined for credit and a person with a "Very Poor" credit score be approved for credit.

4. CRA's generally base their scores on information pertaining to the last 12 months, whilst lenders generally focus the last 36 months (the caveat being defaults and CCJ's).

So they do see it, then.

SeanG79

The lenders that I know see the score use CAIS score, which is provided by Experian, but in all cases lenders using CAIS score is related to business finance as opposed to personal finance.

meer53

When i use Experian, there is no score to view. So maybe some see a score and some don't ?

SeanG79

Meer53 - are your Experian searches related to business finance, consumer finance or both?

Ben8282

meer53 wrote: »

There are enough examples on this forum of people with "excellent" credit scores being declined for products, the "credit score" is meaningless, what matters is whats on the credit file. It pays to check your credit file information, NOT whatever score they give you. The score is an indication of whats on your file, so it's useful to consumers from that point of view, but meaningless to a lender.

I agree with this.
I believe that the score gives an indication of the general credit worthiness of an individual based on the conduct of the accounts reported on that credit report (which can be misleading where important accounts are not reported on that particular credit report) and a verification that the individual is on the electoral roll, has no adverse public records etc
But it is almost meaningless in terms of acceptance for a specific product as there are so many additional factors to be taken into account that are not covered by the credit report.

meer53

SeanG79 wrote: »

Meer53 - are your Experian searches related to business finance, consumer finance or both?

Consumer finance.

SnowTiger

Despite the mantra here that credit scores aren't important...

http://www.experian.co.uk/business-express/credit-report/consumer/:

When it comes to financial risk, the people you’re dealing with can be just as important as where they’ve come from or who they work for.

Experian Consumer Reports let you check an individual’s credit report online, allowing you to make quick, informed decisions about who you do or don't want to do business with.

So, if you’re looking for more information on a company director, business proprietor, or extending credit to individuals, our Consumer Reports will give you the information you need.

[...]

Risk Scores

We distil the data held on our credit databases into simple and easy-to-use risk scores

And here, second line of Mr D Demo's report is Credit Score.

I think the big boys do their own credit scoring, but smaller companies can buy a credit scoring (or risk scoring) service from the CRAs.