If credit scores are irrelevant why have them and why no transarency in calculating and credit? 18 July 2022 at 11:11AM in Credit file & ratings 6 replies 201 views

Stixalot

Hi all,

I am just trying to get my head around why these fake scores exist and why there seems to be no transparency when it comes to calculating these so why have them? this is very misleading when it comes to portraying chances of obtaining credit and should be removed as it will only encourage people to make hard applications which then affect there reports. Also why there is no transparency around the reasons for rejections for credit. it would be nice if i was rejected for credit for the lender to give me an accurate reason why and what i actually need to do to meet their criteria for credit as it does affect my confidence and mental health not knowing the full reasons why behind the rejection other than a generic you dont meet our criteria.

comeandgo

I always thought they were there for the gullible to pay a fee to a company to tell them what they already know, you know yourself if you have been late in making any payments and the consequences of it.  Why would you pay a company to confirm that for you.

tightauldgit

The credit scores are there to give you a guide but at the end of the day the credit scoring agencies are only there to provide information - they can't actually determine whether any specific lender will lend to you. So it's not possible for them to give any kind of definitive answer on whether you will definitely be OK. The alternative of course is that you don't have any guide to the strength of your credit and then you have to apply blind and I'm not sure how that's any better. 

As to why the lenders don't tell you why you were refused I imagine it's because they don't want to end up in interminable back and forths with customers who have been refused credit on why exactly they were refused and why it was fair or unfair and what special circumstances apply as to why they really should have lent them money this time... there's nothing to be gained for them in providing more information than they have to. At the end of the day they are under no obligation to lend to anyone and if they want to say no because they just don't fancy it then they can. 

Probably healthier not to see a rejection of credit as a slight on you personally but just the application of some arbitrary criteria to a set of data. 

[Deleted User]

Stixalot said:

Hi all,

I am just trying to get my head around why these fake scores exist and why there seems to be no transparency when it comes to calculating these so why have them? this is very misleading when it comes to portraying chances of obtaining credit and should be removed as it will only encourage people to make hard applications which then affect there reports. Also why there is no transparency around the reasons for rejections for credit. it would be nice if i was rejected for credit for the lender to give me an accurate reason why and what i actually need to do to meet their criteria for credit as it does affect my confidence and mental health not knowing the full reasons why behind the rejection other than a generic you dont meet our criteria.

The scores exist because the CRAs would love to have us on the US system where they control your life so normalising scores being part of credit applications in the minds of the general public helps them push towards this goal.

The score is there as a rough guide, on a par with a horoscope i.e. the broken clock principle, it might be right occasionally. As the CRAs do not lend then what they score you is meaningless, but they are trying to guess based on the sort of scoring systems they sell to smaller lenders (the bigger ones use their own systems based purely on the data on the file) so someone who pays their card in full monthly and has no late payments/defaults is more likely to get prime credit so would get a higher score.

In terms of why they are rejecting you - it should be obvious - if they told you why, you would simply try and game the system to get approved for credit they don't think you should get e.g. if they will only give a loan to someone who earns £26500 and an applicant put in £25000 and they told them that they don't earn enough, they might be tempted to gain a payrise overnight and apply at £26500 salary

Exodi

Deleted_User said:

In terms of why they are rejecting you - it should be obvious - if they told you why, you would simply try and game the system to get approved for credit they don't think you should get e.g. if they will only give a loan to someone who earns £26500 and an applicant put in £25000 and they told them that they don't earn enough, they might be tempted to gain a payrise overnight and apply at £26500 salary

Seems I always agree with Farfetch but as usual, I endorse the above.

Could you imagine if someone received an email saying:

"Thank you for your recent loan application. Unfortunately you were unsuccessful on this occasion. When asked how many hours you work a week, you answered 34, which we categorise as part time. We are only able to consider applications from people who work 35 or more hours, which we categorise as full time."

or

"You stated that you have discretionary income of £490, after you have paid your bills. Unfortunately we are only willing to consider applicants with discrentionary income of £550 for this loan."

What do you think would happen next?

MEM62

Stixalot said:

I am just trying to get my head around why these fake scores exist and why there seems to be no transparency when it comes to calculating these so why have them? 

Marketing gimmick.  Nothing more, nothing less.  

MattMattMattUK

Stixalot said:

Hi all,

I am just trying to get my head around why these fake scores exist and why there seems to be no transparency when it comes to calculating these so why have them? this is very misleading when it comes to portraying chances of obtaining credit and should be removed as it will only encourage people to make hard applications which then affect there reports. 

I agree with the others on these, they are a marketing gimmick and also a partial attempt to push towards a US style system, which is not what the lenders (or any sensible consumers) in the UK want. 

Stixalot said:

Also why there is no transparency around the reasons for rejections for credit. it would be nice if i was rejected for credit for the lender to give me an accurate reason why and what i actually need to do to meet their criteria for credit as it does affect my confidence and mental health not knowing the full reasons why behind the rejection other than a generic you dont meet our criteria.

Their criteria are complicated because their algorithms are complex and proprietary, they are also commercially sensitive and so they would not want to open them up to the public. Banks spend a lot of money on working out who is profitable to lend to and who is not, they do not want to give that information away for free.

Stixalot said:

as it does affect my confidence and mental health 

I would recommend that you speak to your GP about this and seek help. A declined application for a credit card or a loan should not be something that should impact your mental health so I would really recommend that you seek help managing your anxiety.