I thought 'credit score' was meaningless

trient

whitesmith said:

Nope, nothing on that forum either. Still i am sure someone will soon provide a link showing someone whonis bankrupt having a 999 score.

There you go (via Google).
https://forums.moneysavingexpert.com/discussion/4420089/credit-file-has-a-rating-of-999-excellent
++more here https://forums.moneysavingexpert.com/discussion/comment/75789213#Comment_75789213

whitesmith

thanks trient ! interesting reading.

D3xt3r5L4b

And here: https://www.reddit.com/r/UKPersonalFinance/comments/gdgczf/999_experian_credit_score/?utm_source=amp&utm_medium=&utm_content=post_body

If you look, thou shalt find. 

whitesmith

Thanks, and i shalt also not covet thine ox.

RG2015

I am totally convinced by the argument that credit scores are meaningless. However, I find the evidence lacking in rigour.

It sometimes feels like "Thou shalt not pay any attention to credit scores on pain of being ridiculed mercilessly."

However, in the interest of balance, I can report that my wife has a credit score of 999. She has no personal income and no credit cards.

A year ago, I had 6 credit cards with a combined credit limit 50k and a score of 629 and was accepted for a 7th card with a £7.5k limit.

PS: Credit cards 6 to 7 were for 0% interest, zero fee balance transfer cards ranging from 12 to 20 months interest free.

Grumpy_chap

RG2015 said:

I can report that my wife has a credit score of 999. She has no personal income and no credit cards.

A year ago, I had 6 credit cards with a combined credit limit 50k and a score of 629 and was accepted for a 7th card with a £7.5k limit.

Well, this kind of makes sense.

The "credit score" is a guide generated by the credit agencies using some rules they created based upon the data they hold and really assesses how well your current lines of credit are managed and whether you have a lot of credit and / or need more credit.  Changes make the "score" go down.  The CRA's even say as much on their websites.

So, no credit can't be poorly managed and builds up a good "score".  The CRA's don't seem to consider a 'thin' credit file, though I understand that lenders do.

The CRA's also don't show affordability as a factor in the calculation of "credit score", but lenders will definitely take affordability into account.

So, it is possible to have a good "credit score", say 900/1000 but poor affordability so the likelihood of being accepted for another loan / credit card is zero - zilch - nada.  Someone else may well have a lower "score", say 700/1000 but excellent affordability / disposable income so they can get more credit, but maybe not at market leading rates if they have missed the odd payment date along the way.

Given that the lenders keep their scoring processes confidential, for the average person who cannot interpret the information in the data files, the "credit score" gives an indication of whether they are managing things OK, better or worse than last year, or need to improve the way they carry on.  At this level, the "score" is useful, but nothing more.

whitesmith

it seems to me that there is a lot of conflating the idea that credit scores are 'meaningless' with the use of that score in processing credit applications by lenders.

Credit scores are rarely used by lenders in making their decisions but that does not mean they are meaningless

RG2015

@Grumpy_chap, This is a well balanced and informative summary.

The Experian help pages are very slick and mostly informative, but are inevitably biased towards their own financial interests.

Fingerbobs

Grumpy_chap said:

Given that the lenders keep their scoring processes confidential, for the average person who cannot interpret the information in the data files, the "credit score" gives an indication of whether they are managing things OK, better or worse than last year, or need to improve the way they carry on.  At this level, the "score" is useful, but nothing more.

This is how I've always interpreted the credit score - as an indicator of how you're doing - but on the couple of occasions I've suggested pretty-much exactly the same thing on these forums, I've been ridiculed and mocked, and told in no uncertain terms that the credit score is meaningless and to be totally ignored.

Yahoo_Mail

Fingerbobs said:

Grumpy_chap said:

Given that the lenders keep their scoring processes confidential, for the average person who cannot interpret the information in the data files, the "credit score" gives an indication of whether they are managing things OK, better or worse than last year, or need to improve the way they carry on.  At this level, the "score" is useful, but nothing more.

This is how I've always interpreted the credit score - as an indicator of how you're doing - but on the couple of occasions I've suggested pretty-much exactly the same thing on these forums, I've been ridiculed and mocked, and told in no uncertain terms that the credit score is meaningless and to be totally ignored.

When bankrupts and others with extremely poor credit files are being given high scores (some, not all admittedly) and there are people with what would be considered "good" credit files are receiving lower scores than they realistically should, how can you have any faith in the system? Are you one of these who have been given the wrong score?  The only way to know is to find out what lenders look for and see if any of that applies to your file, which of course negates the point of a credit score completely because you're doing all the work yourself.

Then there is the fact that CRAs have a bizarre system of punishing pretty much ANY change to your credit file which pretty much no lender would do and is that drop on your score this month actually meaningful?  Are you really on the "wrong track" because you paid off your loan?  The CRAs seem to think so, but lenders certainly don't.

This is why the scores are meaningless, they don't follow the same criteria as actual lenders and they can't be trusted to be accurate.