Why you might be wrong about credit scores

nyermen

As someone who used to implement credit models for a living (not design them, I'm no maths whiz), I'm going to nibble here. I have (possibly on here) said several times that the tone of "history not score" is a bit harsh - if only because many media outlets scream constantly about score etc, and sometimes one is mentioned meaning the other.

However - ZX81 is absolutely correct in that many bank models (in fact most of the ones i've seen) do not consider lack of behaviour in the same way.  On top of this, for most retail asset classes (ressy mortgages, etc), they're mostly doing "Internal Ratings Based approach" for Basel purposes (less regulatory capital cost than "standard approach").  This normally means two components - an application scorecard (based on your circumstances today) and a behavioural scorecard (which may include history from credit agencies or may use the banks internal only).  Final number combining application and behaviour scores is balanced depending on the length of your relationship with them.

With my experience I can tell you that two applications, both probably with "999" ratings, one could be rejected by Lender A, accepted by lender B, and the other could be rejected by B but accepted by A.  It's why there is a tone of ignore the score, focus on the history.  It's not entirely fair, but it is a key point to make for what the actual point of your record is (borrowing!)

Should add - some very small lenders (disruptor banks etc.) did actually buy the scores themselves from the agencies.  Various reasons such as when IFRS/9 (an accounting standard) came in, they all panicked as they had to start using PD/LGD models in a hurry...

2021BJ

Dandytf said:

I have posted via mse before that I also use Increases or Decreases in various cra Scores as an indication of changes in reports, could be on time payments as most mser's advise, it could be a missed payment/s when my circumstances change -at least the Score can be used as not every person reads through their reports/history regularly.
IMy latest example is after almost 10 years of dmp -it's taken until Jan 21' to witness my Experian Score rocket up-to 9xx's range again.
What has helped is on time payments of bills and risky new high apr cards past few years.
As OP Posted, far too much Negative comments when some use their Score as Mental Motivation to Visually help whilst improving their ratings.

And what happens when their score goes down?  They get demotivated or depressed?  What happens when their score goes down for no good reason?  Do they get demotivated to depressed for no good reason?

Following scores is pointless.  You're far better off learning what lenders like and don't like and then reviewing your file yourself.  It really doesn't take very long each month, and at least you'll know it's accurate.

wannabe_a_saver

I'm sorry that people were rude to you. 

jpsartre

bigkenny1975 said:

The score had a use for me, that proves that it is not useless as it had a use for at least one person.

A bit like denying healing stones are useless because you can use them as a door stop. It's true of course but also kinda misses the point.

Vinknut

I think it's a bit of a recurring theme that people come here chasing a better credit score, when what they actually want is (presumably) access to better loan/credit products and rates.  And the fact that the credit score is entirely fabricated based on a random set of criteria, and ignores some of the most important lending criteria (eg, income) gets a bit frustrating having to explain the same things over and over again (especially when a lot of the information is in pinned threads).
If you like chasing figures, and you are in debt, then chase your debt figure, or your income to debt ratio, or your utilisation.
Say you have an average credit score; you maybe have a missed payments, some cash withdrawals on a credit card, a string on minimum payments, successfully applied for a few credit cards in a row; you "boost" your score by getting a "bad credit, score boosting" credit card.  Now a lender not only sees your below average credit track record, they see you have a "bad credit" credit card too.
If you want to game it, that's fine, but don't expect that having a credit score of 999 has any meaning at all when applying for products, in fact, it might actually make your position worse than it was before.

dr_adidas01

Vinknut said:

I think it's a bit of a recurring theme that people come here chasing a better credit score, when what they actually want is (presumably) access to better loan/credit products and rates.  And the fact that the credit score is entirely fabricated based on a random set of criteria, and ignores some of the most important lending criteria (eg, income) gets a bit frustrating having to explain the same things over and over again (especially when a lot of the information is in pinned threads).
If you like chasing figures, and you are in debt, then chase your debt figure, or your income to debt ratio, or your utilisation.
Say you have an average credit score; you maybe have a missed payments, some cash withdrawals on a credit card, a string on minimum payments, successfully applied for a few credit cards in a row; you "boost" your score by getting a "bad credit, score boosting" credit card.  Now a lender not only sees your below average credit track record, they see you have a "bad credit" credit card too.
If you want to game it, that's fine, but don't expect that having a credit score of 999 has any meaning at all when applying for products, in fact, it might actually make your position worse than it was before.

Just one thing lenders don’t see the names of who provides your credit products or what APR  lending products are.  They do see if you have a promotional rate on any credit products as that is reported to the CRAs, along with cash withdrawals. 

Sure they could work out that if you have a credit limit of £200 on your credit card that it would be a card for poor credit or those with limited credit history and that would be all. 

bigkenny1975

What I think the comments on this post have shown is that some people cannot accept others have motivation that is different to them. It feels like the camps are as divided as the different sides of the Brexit debate. 

My score motivates me, what do I do if it goes down? It just did after the mortgage credit search, I'm not bothered by it going down because I have a new target to aim for with good behaviours. I'm not going to ruin my chance of good credit when I need it by playing the scores, but I'll still monitor it and try and keep it high. 

2021BJ

bigkenny1975 said:

What I think the comments on this post have shown is that some people cannot accept others have motivation that is different to them. It feels like the camps are as divided as the different sides of the Brexit debate. 

My score motivates me, what do I do if it goes down? It just did after the mortgage credit search, I'm not bothered by it going down because I have a new target to aim for with good behaviours. I'm not going to ruin my chance of good credit when I need it by playing the scores, but I'll still monitor it and try and keep it high. 

People are perfectly capable of accepting your motivation, we just think it's bonkers.

[Deleted User]

Dandytf said:

I have posted via mse before that I also use Increases or Decreases in various cra Scores as an indication of changes in reports, could be on time payments as most mser's advise, it could be a missed payment/s when my circumstances change -at least the Score can be used as not every person reads through their reports/history regularly.
IMy latest example is after almost 10 years of dmp -it's taken until Jan 21' to witness my Experian Score rocket up-to 9xx's range again.
What has helped is on time payments of bills and risky new high apr cards past few years.
As OP Posted, far too much Negative comments when some use their Score as Mental Motivation to Visually help whilst improving their ratings.

There are better ways to motivate and validate your work than focusing on a fictional score. Your score is in the 9xx - great, but 10 years on a DMP, unless that ended 6 years ago, many lenders will not touch you which makes a mockery of the score - 900/999 is ~90% almost perfect in other words, but if lenders won't lend to you, then what have you achieved by focusing on your score?

If I put Experian aside as the MSE club has score me 999 since I registered due to bugs, and I can't seem to find past scores on Credit Karma, my Clear Score was 504 / 700 (? think it's 700), in December, yet I was able to get a new BT card without any problems with my bank, limit was around £5500 on top of the 3 cards I already hold, 2 mainstream spending totalling 7k limit and a BT card which had about 5k / 8.5k limit on a salary of a bit under 24k. Good offers because of my history of good credit behaviour, nothing to do with any magical score.

cymruchris

bigkenny1975 said:

What I think the comments on this post have shown is that some people cannot accept others have motivation that is different to them. It feels like the camps are as divided as the different sides of the Brexit debate. 

My score motivates me, what do I do if it goes down? It just did after the mortgage credit search, I'm not bothered by it going down because I have a new target to aim for with good behaviours. I'm not going to ruin my chance of good credit when I need it by playing the scores, but I'll still monitor it and try and keep it high. 

I can understand the motivation - and looking at things from another perspective compared to the way the herd of experienced posters here tend to offer advice - if only the score really was something to focus on. If it was truly accurate - and based on standard algorithms across the board - so that it was regulated - I think you'd have a very valid cause in the way you approach it going up and down, and trying to improve it.

Sadly though - each of the CRA's have their own algorithms - they aren't working to any standard spec - and as a result people that focus on the score can become demotivated when it flies all around the place for no good reason (other than the fact the CRA has faffed around with their algorithms again). 

So I do see the appeal, I do see how you could be motivated by it, but the way they operate it doesn't really marry up with your expectations, which can lead to disappointment in the long run. For many people they really are just a very rough guide as to where they are currently - but I would take the whole thing around credit scores being wholly accurate with a large dash of sodium chloride.