Does opening a load of bank accounts affect your credit score?

NottinghamKnight

Eco_Miser said:

Deleted_User said:

It wasn't.

D3xt3r5L4b said:

Interesting point about lenders not seeing your score. Not so long ago I worked in credit risk and the CRA did provide a general score indicating credit rating alongside 100s of other history-related variables. That score did appear to be on the same scale as the consumer score, but can't confirm if it was the same one.

It won’t have been

How do you know that?

It seems reasonable that if a CRA is providing a score to its clients, it will be the same as the one it shows to the subjects.

It's quite likely that they are supplying different scores to either party. If you are providing services to effectively two parties on either side of a contract then you aren't necessarily supplying them with the same service, eg lawyers acting for different sides in a contract. Ideally the CRAs would supply a service that they can effectively generate income from either side if possible.

colsten

If there was one common, published, industry standard for working out that credit score number, it could perhaps make a small amount of sense for the banks to take it into consideration when determining whether accepting an application is an acceptable risk for them. But there isn't such a standard. The CRAs don't use the same scale, or the same criteria, when working out their fancy number. Most importantly, though, banks have a need for a dynamic system over which they have complete control, and that they can tweak to their needs at any given point in time. After all, the banks need to assess their own risk, and the CRAs don't have any stake in the game.

Eco_Miser

NottinghamKnight said:

Eco_Miser said:

Deleted_User said:

It wasn't.

D3xt3r5L4b said:

Interesting point about lenders not seeing your score. Not so long ago I worked in credit risk and the CRA did provide a general score indicating credit rating alongside 100s of other history-related variables. That score did appear to be on the same scale as the consumer score, but can't confirm if it was the same one.

It won’t have been

How do you know that?

It seems reasonable that if a CRA is providing a score to its clients, it will be the same as the one it shows to the subjects.

It's quite likely that they are supplying different scores to either party. If you are providing services to effectively two parties on either side of a contract then you aren't necessarily supplying them with the same service, eg lawyers acting for different sides in a contract. Ideally the CRAs would supply a service that they can effectively generate income from either side if possible.

It's my understanding that lawyers don't act for both sides of a contract. Conflict of interest. You're suggesting that CRAs give a different opinion on the same thing to different parties to that thing. Seems a good way to lose a reputation for trustworthiness.

NottinghamKnight

Eco_Miser said:

NottinghamKnight said:

Eco_Miser said:

Deleted_User said:

It wasn't.

D3xt3r5L4b said:

Interesting point about lenders not seeing your score. Not so long ago I worked in credit risk and the CRA did provide a general score indicating credit rating alongside 100s of other history-related variables. That score did appear to be on the same scale as the consumer score, but can't confirm if it was the same one.

It won’t have been

How do you know that?

It seems reasonable that if a CRA is providing a score to its clients, it will be the same as the one it shows to the subjects.

It's quite likely that they are supplying different scores to either party. If you are providing services to effectively two parties on either side of a contract then you aren't necessarily supplying them with the same service, eg lawyers acting for different sides in a contract. Ideally the CRAs would supply a service that they can effectively generate income from either side if possible.

It's my understanding that lawyers don't act for both sides of a contract. Conflict of interest. You're suggesting that CRAs give a different opinion on the same thing to different parties to that thing. Seems a good way to lose a reputation for trustworthiness.

Yes, I'm suggesting exactly that and would be surprised if it wasn't the case, you don't tell your customers something they don't want to hear if you want to be successful. I'm a bit surprised by the apparent naivety that the CRAs are trustworthy, they are businesses after all. They have a variety of income streams, the basic provision of individual's credit accounts and credit history is the cornerstone but is low value, leveraging that information is far more lucrative. The 'added value' products sold to consumers are amongst the more lucrative but there is healthy cynicism as to their accuracy, and they come heavily caveated.
So yes a 'credit rating' may be sold to both lender and potential customer and these may well differ. It's probably unfair to say the credit rating is worthless as it provides a broad indication of an individual's situation, and has the purpose of indicating at what level an individual may obtain credit facilities. The credit rating sold to businesses is of low value, but may help banks and other credit providers in determining the general situation of people and their target market. 
The US market is very different and the credit rating is of value and is widely relied upon.

[Deleted User]

Eco_Miser said:

Deleted_User said:

It wasn't.

D3xt3r5L4b said:

Interesting point about lenders not seeing your score. Not so long ago I worked in credit risk and the CRA did provide a general score indicating credit rating alongside 100s of other history-related variables. That score did appear to be on the same scale as the consumer score, but can't confirm if it was the same one.

It won’t have been

How do you know that?

It seems reasonable that if a CRA is providing a score to its clients, it will be the same as the one it shows to the subjects.

It would be completely unreasonable.  CRA reward stability and inertia.  Lenders value low risk - and each rates risk in their own way.  It's a fundamental part of lending.

Incases where a lender requests a score from an CRA, it's based on the lender's criteria, not the CRAs.

Eco_Miser

Deleted_User said:

Eco_Miser said:

Deleted_User said:

It wasn't.

D3xt3r5L4b said:

Interesting point about lenders not seeing your score. Not so long ago I worked in credit risk and the CRA did provide a general score indicating credit rating alongside 100s of other history-related variables. That score did appear to be on the same scale as the consumer score, but can't confirm if it was the same one.

It won’t have been

How do you know that?

It seems reasonable that if a CRA is providing a score to its clients, it will be the same as the one it shows to the subjects.

It would be completely unreasonable.  CRA reward stability and inertia.  Lenders value low risk - and each rates risk in their own way.  It's a fundamental part of lending.

Incases where a lender requests a score from an CRA, it's based on the lender's criteria, not the CRAs.

Why would a lender request a score from a CRA? They'd want the raw data to apply their own algorithms.

D3xt3r5L4b  said that one was provided, along with 100s of more relevant variables. Why wouldn't that be the "Here's what we're telling the punters" score?

Eco_Miser

NottinghamKnight said:

Yes, I'm suggesting exactly that and would be surprised if it wasn't the case, you don't tell your customers something they don't want to hear if you want to be successful. I'm a bit surprised by the apparent naivety that the CRAs are trustworthy, they are businesses after all.

If you tell your customers lies, because that is what you want to hear, how long are you (or they) going to stay in business?

Surely a potential lender wants to hear "This subject is NOT a good risk" if that is the case. On the other hand, an individual who is a poor risk might not like to hear that, but can be sold ways of improving, whereas one with a 999 score can't be sold much at all.

[Deleted User]

Eco_Miser said:

Deleted_User said:

Eco_Miser said:

Deleted_User said:

It wasn't.

D3xt3r5L4b said:

Interesting point about lenders not seeing your score. Not so long ago I worked in credit risk and the CRA did provide a general score indicating credit rating alongside 100s of other history-related variables. That score did appear to be on the same scale as the consumer score, but can't confirm if it was the same one.

It won’t have been

How do you know that?

It seems reasonable that if a CRA is providing a score to its clients, it will be the same as the one it shows to the subjects.

It would be completely unreasonable.  CRA reward stability and inertia.  Lenders value low risk - and each rates risk in their own way.  It's a fundamental part of lending.

Incases where a lender requests a score from an CRA, it's based on the lender's criteria, not the CRAs.

Why would a lender request a score from a CRA? They'd want the raw data to apply their own algorithms.

D3xt3r5L4b  said that one was provided, along with 100s of more relevant variables. Why wouldn't that be the "Here's what we're telling the punters" score?

No.  Have a look at what I wrote. 

In the cases where a lender asks a CRA to create a score for them, such as the smaller providers, the score is based on the criteria that the lender provides.  No lender would say "We don't know what makes a low risk customer, so why don't you just give us a random number and we'll use that."

NottinghamKnight

Eco_Miser said:

NottinghamKnight said:

Yes, I'm suggesting exactly that and would be surprised if it wasn't the case, you don't tell your customers something they don't want to hear if you want to be successful. I'm a bit surprised by the apparent naivety that the CRAs are trustworthy, they are businesses after all.

If you tell your customers lies, because that is what you want to hear, how long are you (or they) going to stay in business?

Surely a potential lender wants to hear "This subject is NOT a good risk" if that is the case. On the other hand, an individual who is a poor risk might not like to hear that, but can be sold ways of improving, whereas one with a 999 score can't be sold much at all.

Depends on who you mean by customers. If you mean average consumers then it makes sense to supply them with a largely made up number (up to 999) for which they are happy to pay you money but means little in terms of gaining credit in the real world.
If you mean financial institutions then they will be doing their own assessment and due diligence in any case, but need a suitable spread of borrowers, at varying risk levels and so interest charges to maximise returns and keep defaults to sensible levels. 

Consumerist

Credit scores are generated and used by lenders and their criteria for lending varies with the lender. The "scores" you get on credit reports are just rough guesses based on your historical use of credit. Lenders will ask questions about your financial status in your application whereas the purveyors of credit reports will have little or non of this information to go on.