Understanding/Comparing Credit Scores

Discussion in 'Newbies' started by Free2travel, Jan 10, 2014.  |  Print Topic

  1. Free2travel

    Free2travel Silver Member

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    I'm signed up with Credit Sesame for their free service. They sent me an alert that my score had dropped. More than likely, it's because I did a round of applications and lowered a credit line to get a new card. Anyway, I decided to check my free FICO score through Barclay's. It's an 813. Any idea how that would compare to Experian and the other credit reporting agencies? Is FICO usually lower or higher than the others?

    Thanks for your experience. I'm going to wait 6 months this time between applications and let my scores bounce back.

    Michelle
     
  2. moongoddess

    moongoddess Silver Member

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    The score you're seeing from Barclay's in going to be more relevant than anything you get from Credit Sesame and other such services. At 813, you have no worries. That's till a very high FICO score. But it's always safe to wait a few months between applications.
     
  3. miles and smiles
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    miles and smiles Gold Member

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    The score you get from Barclay's is your Transunion score. Your Experian and Equifax scores will probably be a little different (though close to your Transunion score). The score you get from Credit Sesame is an estimate of your Experian score.
     
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  4. satman40

    satman40 Gold Member

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    813 is very high, and the number will not be the same on all reports,

    A FICO score is not about net worth, so at some point the score will drop. I checked mine not too long ago, and have never been refused a loan or a CC in my life, and mine is not 813,

    As long as they give you the card why worry about it, I'd be more worried if the told me no.

    You should do fine, just pay on time...
     
  5. Free2travel

    Free2travel Silver Member

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    Thank you! I'll ignore Credit Sesame from now on and just stick with my Transunion Score through Barclay and my free reports once a year.
     
  6. satman40

    satman40 Gold Member

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    A lot of these services want to push cards also,
     
  7. cocobird

    cocobird Gold Member

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    The FICO score is a very generalized score applicable to the general population. The credit score used to determine whether to grant a credit card or not may or may not be based on the FICO score.

    Very large credit card providers often have supplementary credit scoring methods. The credit score would based on the bank's own portfolio of credit cards and repayment experiences.

    There are also multiple ways to credit score. For instance, someone who has relatively little in credit history is known as a "thin" file. That credit scoring method will be different than credit scoring for people who have robust credit histories.

    The number of credit scoring systems is dependent on the bank's needs.
     
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  8. LarryInNYC

    LarryInNYC Gold Member

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    Indeed, your credit score may not be involved in the decision at all. My wife and I both just received rejection letters from Barclays for the US Airways business card (my wife received a second personal card the same day). The reasons was sufficient credit at Barclay's already. Our Transunion scores -- the ones used to decide whether we are credit-worthy -- were included on the letters. Mine was 836 and my wife's a perfect 850.
     
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  9. jbcarioca
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    jbcarioca Gold Member

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    Just a couple of tiny clarifications, if you don't mind:
    There really is not a single FICO score. The generic scores that consumers see are virtually never used for any issuer to make credit card approval decisions. FICO sells services and software for specific specialised uses such as Falcon (for fraud and transaction level authorisations) and Triad (which houses multiple models used for different purposes. They also are prolific producers of specialised models serving individual lender requirements including models called, among other things, response, initial credit line assignment, credit line increase, activation, velocity, risk, propensity (various types), behaviour (collections) and so on. Further there are regulatory mandated modes such as POD, LGD and a few other alphabet soup types that are required. even more there are limitations and policy constraints that have nothing to do with scores, and in fact if scores are decent (in generic FICO terms, above 770 or so) non-score attributes will dominate decisions. Beyond all those customer history can and does produce entirely different scoring and decisioning methods, including non-score-based blacklists, which can be based entirely on curbing behaviour or profitability projections.

    Specific populations do have, as you say, specific models, as do data from each credit bureau and in most cases, large affinity groups (anybody wonder why most airline affinity cards have higher limits than do low end retailer affinity cards?), and product type.

    Above all everyone should be well aware that YMMV. In fact Your Mileage Does Vary. Moral: be very, very careful!
    A few years ago I was working on velocity-based modelling for a major credit card issuer oft mentioned on these pages. Just for fun, skirting the limits of propriety, three of us looked at my history and scoring and compared it with another of us. Both of us had been customers for a long time, both of us had generic FICO ~800, but had quite different behaviour histories. Among other things it became obvious why I could be logically declined (actually referred) when I tried to buy a $5.00 item at a local Target, but be approved for a $18,000 airline ticket from Aeroflot purchased in Prague. There is much much more to these decisions than people seem to know, and it always scares me to see people taking chances with their financial future for ephemeral gains.

    Your results are perfectly predictable, as you imply. One thing that produces regular rejection form most large credit card issuers is credit score that are too high. Anybody who can produce a generic credit score above 800 has a few known characteristics. They all have a long credit history, stable residence, stable domestic status, stable banking relationships and zero revolving debt. You'd think such people would have universal attractiveness but they do not. Why? Most credit card portfolio profit comes from revolving balances and late/overlimit fees. People with these scores are never late, never over limit and do not revolve. ergo, banks get creative about turning them down. I have had decline to renew for a huge issuer with whom I have a long perfect record because my single revolving card with them had never revolved. They were please to issue an annual fee producing charge card with generous terms because I did make large purchases and the annual fee gave them the profits they want. It's a modest surprise that Barclays made such a decision for you because they make more than twice the margin on typical purchases (interchange) with a business card than they do on consumer ones and the business cards do not have consumer rights either. However, the approval processes for the two are entirely different and normally business cards are not reported to credit bureau (YMMV on that too- proprietorships mostly do report, limited liability forms typically do not)
     
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  10. cocobird

    cocobird Gold Member

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    I don't mind at all. Knowledge is a good thing. :) My original comment was to illustrate the point that the FICO score is merely one tool in the arsenal of credit analysis.

    Since we are on the subject of clarifications - a credit score is a relative predictor of likelihood of repayment. The higher the score, the more likely that credit will be repaid in accordance with the terms of the loan. Financial institutions will vary the cut off score they use to approve credit based on its current risk appetite. In addition, many lenders have a gray area - scores within a certain range - that require a second review of the application to approve or deny the loan.
     
    Last edited: Jan 31, 2014
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  11. LarryInNYC

    LarryInNYC Gold Member

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    This is the first time I've ever received a denial for a credit card, and I don't think my scores have increased very much. In my experience only Barclays seems to care about scores that are too high.
     
  12. cocobird

    cocobird Gold Member

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    Actually, Barclays probably didn't care that much about the score. This is a case where other factors played a critical role. I've been denied credit on the basis that I had too many inquiries or too many recent credit cards (this was nine months after my last round of applications). So the advice that you can apply every 3 months should be taken with a grain of salt. My FICO scores are in the 800s.
     
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  13. jbcarioca
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    jbcarioca Gold Member

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    Factually that is not quite correct. Most generic FICO scores use 2 times 60 days past due within 12 months as the dependent variable. Although taht is closely correlated with probability of repayment is is definitely not the same thing. Another measure, Probablity of default (POD) reflects that risk.
    Large issuers have several different procedures, some of which, for some of them, involve human intervention, but by no means all of them.
    Among others all of the five largest issuers of credit cards in the US use such cutoffs. There are also almost always exceptions to any rules of thumb. Barclays is not the only one, nor even the most aggressive in that respect,. You're fortunate that you've not and taht situation more often. That may be because you usually choose credit instruments that are designed for people in your circumstances. However, I always try to repeat YMMV.
     
  14. cocobird

    cocobird Gold Member

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    That is interesting that you can pinpoint a factor. I was a bank examiner and the proprietary nature of credit scoring meant that the scoring system could not by closely reviewed for anything but discrimination factors. In other words, we were permitted to know what factors went into the scoring system, but not the weighting of such factor.

    So unless you are one of the statisticians creating the credit scoring system, you would not be able to pinpoint the primary factor. If an application is manually reviewed, then the lender might choose to select the factors that weight the most in his/her mind such as the one you pointed out.
     
    Last edited: Jan 31, 2014
  15. jbcarioca
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    jbcarioca Gold Member

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    Absolutely! Quite some years ago i was with a group of people before the NBE on just that issue and a few others oriented towards safety and soundness issues. As you point out, apart from the people who actually build a model few, if any, have access to the information they'd need to make a causal conclusion, notwithstanding the legal requirements to issue reason codes. Even most who might have access do not have access to all the relevant ones. in fact the dreaded multicollinearity (http://en.wikipedia.org/wiki/Multicollinearity) abounds in credit cards issuers precisely because the people who built response models and initial credit risk models do not know each otehr, much less share. That results in the credit risk model being 1/credit risk model thus selecting the worst of the best or vide versa. That is one major reason why App-O-Rama fans still manage to frequently slip through the cracks.

    Apart from being too technical in this post it might interest some readers to know that two gigantic credit card issuers received "cease and desist" orders due to they inability to properly classify credit card account holder risk. Those are public record if anybody wants to look them up. The reason all that is important is the huge risk people take by assuming credit card issuers are stupid and they can take advantage of them indefinitely. Maybe so, but...maybe not.
     
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  16. boondr

    boondr Gold Member

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    I personally think the Barclay's FICO score is a different model than most scores, as it seems higher than most of my other scores (relative) The Barclay score has me at 820 and all of my other scores (even FICO) have them at 770-780. It's all the same for most purposes but it is peculiar.
     
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  17. jbcarioca
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    jbcarioca Gold Member

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    It is less the model taht is different than it is the source. Barclaycard furnishes a score purchased by them from Transunion (TU), using their data to feed a FICO model that is very similar to those sold using Experian or Equifax data. However, TU is strongest in the SouthEast US and has a slightly different set of reporting conventions than do the other two. The result is that there is greater variability in TU score than in the others, Lenders tend to choose TU as their preferred vendor mostly for the Southeastern states. Outside of those TU data produces different results for sure, sometimes higher scores. As you say, it makes little difference in real life when anything 770 or above is generally regarded as fairly pristine.
     
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  18. satman40

    satman40 Gold Member

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    I would almost say they have a quota, I applied for my first credit score and it was 720, and I am 72.

    My wife and I have over 20 credit cards, and 20 properties, we do not have any debt. We have a decent income,

    The other day the credit reporting company sent me a cc offer and showed a 760 FICO,

    In the early days we applied for CC about Thanksgiving time, figuring the Christmas rush would bring us a new card. Citi was the big name back then...came United, and the game was on..

    We use to play banks against each other for home loans, seeing who would loan the most, at the lowest interest.
     
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