Why are credit scores useless?

[Deleted User]

Lenders don't see your "credit score" they know they are useless and mean nothing, what they look at is your credit history, all payments upto date, no missed payments, no ccj's etc

Put another way if your were about to lend someone money would you want to see a random made up number or some facts?

MataNui

The credit score isnt a 'random made up number'. Thats total BS.

When you apply for credit the lender will do a search against one or more CRA. They will want to know that you are the person you claim to be and live where you claim to. They will want to know how much credit you currently have and how well you manage this. The CRA will hold info such as your address history, bank, current credit obligations and repayment history. This is a lot of disparate information thats no use to anyone in that form so the lender will use an algorithm to condense that (#EDIT# and other information they ask for) down into a simple pass/fail, a percentage or a score out of 10/100/1000, whatever. Each lenders algorithm is different and none of them will let anyone know exactly what they look for and what weighting they put on each thing.

The CRA is doing the same thing to come up with your 'credit score'. They are running an algorithm based on common requested information against the data they hold for. So what they are saying is:
If you have a high score they hold lots of information about you to confirm your address, your history, you dont have a lot of credit but any credit you have had in the past or have now you manage well with no missed repayments. In other words everything they hold about you and would give to a lender is positive.
If you have a low score they perhaps dont hold enough about you to confirm your address. Perhaps you are not on the electoral roll or you have moved about a lot or your current credit agreements are on different addresses. Perhaps you have not had credit before so have no history or you have managed it badly with lots of missed payments. In Other words They dont hold much information to give to lenders and what they do hold isnt good.

So its not random, it is useful and sort of important. If you have a low score with a particular CRA then it would be prudent to have a closer look at the information they have about you see if you can find anything wrong. But. Dont get hung up on it too much. Lenders do similar but different and wont see any score a CRA does (and wouldnt care about it anyway). Use it as a guide to what that CRA holds because thats what its intended for.

takman

MataNui wrote: »

So its not random, it is useful and sort of important. If you have a low score with a particular CRA then it would be prudent to have a closer look at the information they have about you see if you can find anything wrong.

This statement is a good example of why a credit score is pretty useless. You should look at ALL information held at each of the three biggest CRA and make sure it is all correct.
If people see a high credit score then they may decide to not look at their report and assume everything is okay when that is not the case.

It is so easy to check the information in your credit report yourself and judge if its good or bad that credit scores are just extra information that isn't necessary. The reason that CRA's generate credit scores is so that they can charge people more money!.

SparklesJD

I'm inclined to agree. I work for a credit union. We use a CRA tool. We do see both the Delphi score and one specific to the CU sector, but as others have said, it's only part of the picture (and a very small part for us, if we even bother to look at it at all).

It's generally indicative of risk, so if someone has a 'poor' rating, I'd expect to see corresponding factors, such as defaults, a history of late or missed payments, etc. - but sometimes it can even be that the person moves house a lot.

We have scoring perimeters predefined when we use the credit referencing tool, based on how strict a criteria we want to apply to that particular product. This gives us a 'decline', 'accept' or 'refer' decision. We don't have to accept the decision that the CRA suggests - it's us lending the money, not them and the CRA check is only a part of our 'know your customer'.

Other lenders have spent a lot of money on more sophisticated algorithms and systems than us, and the things that we do manually happen automatically, but when we assess an application, we do so against our credit policy, so we're looking out for how much credit they have currently (and who from), payment history, affordability of the repayments (which we judge via their income and expenditure, both what they tell us and bank statements), plus any previous history with us, etc.

Each lender will have their own criteria for lending, it will be commercially sensitive and depend on what sector of the market they are in - you might get a loan from one lender, but not another - always check their eligibility before you apply, although that won't tell you exactly what they want, you should get a general idea. We can also see previous searches that have been done - too many in a short space of time looks like you're desperate for cash.

Check your credit report regularly, as others have said, not just the score, but the detail.

pvt

Duckyduck wrote: »

Credit scores are indictative of credit worthiness.

Really. Are they? So given that the CRAs don't know:

• How much you earn;
• What you want to borrow the money for;
• What other outgoings you have;
• What indebtedness you have with lenders that don't report to them; and
• What savings you have.

How "indicative" do you reckon they're going to be?

MataNui wrote: »

When you apply for credit the lender will do a search against one or more CRAs. They will want to know that you are the person you claim to be and live where you claim to. They will want to know how much credit you currently have and how well you manage this. The CRA will hold info such as your address history, bank, current credit obligations and repayment history. This is a lot of disparate information thats no use to anyone in that form so the lender will use an algorithm to condense that (#EDIT# and other information they ask for) down into a simple pass/fail, a percentage or a score out of 10/100/1000, whatever. Each lenders algorithm is different and none of them will let anyone know exactly what they look for and what weighting they put on each thing.

The CRA is doing the same thing to come up with your 'credit score'. They are running an algorithm based on common requested information against the data they hold for. .

Except, it isn't able to, as I pointed out above to duckyduck (and you even allude to yourself), they only have half a picture, so the credit score they come up with is as much use as a chocolate teapot.

CRAs have a pile of data that is either publicly available or that various lenders report to them - having failed to make a decent wad out of selling you (for £12.99 a month or whatever) access to the data they hold about you - they have come up with the weez of turning it into "your credit score" and getting people who don't realize how worthless it is to fret over it. So now you can get "your credit score" free from the CRAs, who will in turn now sell packages and tools to the witless who obsess about improving it.

jessex1990

pvt wrote: »

Really. Are they? So given that the CRAs don't know:

• How much you earn;
• What you want to borrow the money for;
• What other outgoings you have;
• What indebtedness you have with lenders that don't report to them; and
• What savings you have.

How "indicative" do you reckon they're going to be?



Except, it isn't able to, as I pointed out above to duckyduck (and you even allude to yourself), they only have half a picture, so the credit score they come up with is as much use as a chocolate teapot.

CRAs have a pile of data that is either publicly available or that various lenders report to them - having failed to make a decent wad out of selling you (for £12.99 a month or whatever) access to the data they hold about you - they have come up with the weez of turning it into "your credit score" and getting people who don't realize how worthless it is to fret over it. So now you can get "your credit score" free from the CRAs, who will in turn now sell packages and tools to the witless who obsess about improving it.

Im pretty sure when my current account had an overdraft it had a running total of my balance whether it was positive or minus and from that they could guess what my monthly salary was.

david39

Don't you find it strange that the CRAs spend vast sums of money on television commercials advertising a free service for you to check your credit score? Where is the revenue stream from that?
I think somebody is earning money through the backdoor - selling your info,that you give them when you ask for the free credit score, to would-be lenders.
Isn't one of them tied up with the Capital credit card group?

takman

SparklesJD wrote: »

but when we assess an application, we do so against our credit policy, so we're looking out for how much credit they have currently (and who from),

That's an interesting comment to make. Experian state that lenders cannot see the name of who provides credit.

The credit report you see is more comprehensive than the one lenders look at (with your permission of course) because only you see the actual names of your current and past lenders.

So are you saying you can see this information?

takman

david39 wrote: »

Don't you find it strange that the CRAs spend vast sums of money on television commercials advertising a free service for you to check your credit score? Where is the revenue stream from that?
I think somebody is earning money through the backdoor - selling your info,that you give them when you ask for the free credit score, to would-be lenders.
Isn't one of them tied up with the Capital credit card group?

Which CRA are you talking about exactly that advertises a free credit score on TV?

Services which do offer "free" credit scores make their money by recommending products and they make money when people sign up to them. CRA's already have all your information so if they wanted to sell it illegally then they wouldn't need you to give it to them again!.

antrobus

david39 wrote: »

Don't you find it strange that the CRAs spend vast sums of money on television commercials advertising a free service for you to check your credit score? Where is the revenue stream from that?.....

It's probably the same business model that MSE Credit Club uses.

david39 wrote: »

..I think somebody is earning money through the backdoor - selling your info,that you give them when you ask for the free credit score, to would-be lenders....

They've already got your info. They're already selling it. That's what CRAs do. It's all done through the front door.

You don't give them info when you ask for the free credit score. They give you info.

david39 wrote: »

...Isn't one of them tied up with the Capital credit card group?

What do you mean by "tied up"?