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Does opening a load of bank accounts affect your credit score?
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Lender A likes customers who always pay on time and deal only with small values.
Lender B likes customers who spend up big but always manage to pay off the credit card in full.
Lender C likes customers who put their Ibiza holiday on the credit card and then go nuts in the bars over there and take eleven months to pay it back, generating lots of late payments and interest charges, but still hang on and think they are in control of their credit.
Lender D hands out a lot of money but won't touch anyone with more than two addresses in the past 6 years.
Lender E is looking for the one who has a half-trashed credit history with payday loans and who will be grateful for a £100 limit at 40% interest.
Now pray tell me how you can possibly create ONE credit score number that tells each of these different lenders a useful number? The answer is that you can't. NewDay probably has no interest in the first guy and Tesco Bank has no interest in the last guy. The lenders have to do their own scoring based on the criteria that interest them and only them. And next week, the scoring will change when they get scared by something in the news and they tighten their restrictions.
The scores are only useful to you, the borrower, and only for limited reasons, and that is to broadly see whether you're attractive to a wide range of lenders, and more importantly a large change in the number will indicate that something dramatic has happened and that you should make sure you know what it is (ie, keep your eyes out for fraud).1 -
Deleted_User said: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."0
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Malkytheheed said:Deleted_User said: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."
He was adamant that both companies just paid Experian for their score and used it in their lending decisions - and he wouldn't believe me when I said at least the majority of banks don't do this.
However the info provided above saying that CRAs may give scores based on lender-supplied criteria is interesting.
Would it hurt if Experian gave lenders consumer-facing scores too? Lenders wouldn't have to use them if they feel they are meaningless, but if Experian has calculated it anyway why not just send it along with the rest of the info1 -
Because lenders don't want irrelevant data clogging up their data warehouses. It would just be another piece of information to strip out.0
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Does anyone have any experience with the US approach, my limited knowledge suggests that individuals have a single score which sums up their situation and this is accepted by lenders and financial institutions?0
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They use FICO scores, but even there, there's multiple variants of the scores - both from the different CRAs and by product type.
This link is reasonably useful.
https://www.myfico.com/credit-education/credit-scores/how-lenders-use-credit-scores
There's also an interesting section on there about the difference between a FICO score and a credit score.
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