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  • #16
    FICO secrets


    "Ernie Klein" <[email protected]> wrote in message
    news:[email protected]
    Exactly. That's why why I took exception to what you said above: "Your "credit score" is simply a representation of one of your credit reports." If one is denied credit because of their FICO _score_, pulling their credit report won't necessarily give a clue as to why they were *really* denied credit because FICO contains other _unknown_ (to everyone except FICO) things.
    Well is that really the reason for the right to a free credit report on
    credit denial?

    Seems to me the legit reason for that right is to check if you've been a
    victim of identity theft or if the CR is simply reporting something
    factually wrong about you.

    It's not a way to let you snoop into exactly how the lender makes the
    decision to invest his own money. Unless you're a shareholder of that
    loaning company, that is NOYB.


    As would be expected. I believe one CA Senator attempted to introduce a bill last year and may try again this year to outlaw the use of FICO scores in giving or denying credit unless the person seeking the credit is given full disclosure as to exactly what the FICO numbers mean, where they come from and how they are arrived at. In other words, if the law passes, they will not be able to deny credit based on any secret or proprietary methods but will have to say exactly why the credit was denied.
    Of course, the very same consumers that champion this bill would squeal like
    a stuck pig if they passed a law requiring prospective borrowers to disclose
    exactly why they chose not to borrow from a particular lender. (Imagine
    that, it'd be a felony to shred that unsolicited credit card app junk mail
    without writing back to the sender and disclosing exactly why you chose not
    to respond to their junk mail....)



    Comment


    • #17
      FICO secrets


      "Ernie Klein" <[email protected]> wrote in message
      news:[email protected]
      Exactly. That's why why I took exception to what you said above: "Your "credit score" is simply a representation of one of your credit reports." If one is denied credit because of their FICO _score_, pulling their credit report won't necessarily give a clue as to why they were *really* denied credit because FICO contains other _unknown_ (to everyone except FICO) things.
      Well is that really the reason for the right to a free credit report on
      credit denial?

      Seems to me the legit reason for that right is to check if you've been a
      victim of identity theft or if the CR is simply reporting something
      factually wrong about you.

      It's not a way to let you snoop into exactly how the lender makes the
      decision to invest his own money. Unless you're a shareholder of that
      loaning company, that is NOYB.


      As would be expected. I believe one CA Senator attempted to introduce a bill last year and may try again this year to outlaw the use of FICO scores in giving or denying credit unless the person seeking the credit is given full disclosure as to exactly what the FICO numbers mean, where they come from and how they are arrived at. In other words, if the law passes, they will not be able to deny credit based on any secret or proprietary methods but will have to say exactly why the credit was denied.
      Of course, the very same consumers that champion this bill would squeal like
      a stuck pig if they passed a law requiring prospective borrowers to disclose
      exactly why they chose not to borrow from a particular lender. (Imagine
      that, it'd be a felony to shred that unsolicited credit card app junk mail
      without writing back to the sender and disclosing exactly why you chose not
      to respond to their junk mail....)



      Comment


      • #18
        FICO secrets

        In article <[email protected]>, [email protected] wrote:
        On Sat, 15 Apr 2006 04:53:18 GMT, Ernie Klein <eck[email protected]> wrote:
        denied. It wouldn't outlaw FICO outright, just say that creditorscouldn't use or cite a FICO score to deny credit unless the exact sourceof the FICO score was revealed.
        That seems redundant. They obviously couldn't cite a FICO score if they couldn't use it. So the law should just say they can't use it, not that they can't cite it.
        A law that specially outlaws one companies product probably wouldn't
        stand muster. Since CA already had a strong disclosure law when credit
        is denied, mealy adding an additional requirement that expands the
        nature of the disclosure covers not only the existing FICO but any other
        future systems that may be thought up.
        It should simply say the scoring software has to be disclosed to the victim, and that such disclosure could be in the form of a URL letting the victim download the scoring software and run it on their own credit report to verify it worked. Then a lot of open source programmers would add features to let you experiment with the score, do what-if scenarios, display pie charts showing how much weight each factor had in your own score, etc.
        See above. The law wouldn't care one wit about the method or nature of
        a score or any other method used to determine the granting of credit, it
        would only say that if credit is denied, the actual reason for the
        denial be given to the consumer in a clearly understandable way.
        You can bet if a law were passed requiring all credit scoring software to be open source or not used, then all the credit reporting agencies would get together and form an open source consortium to develop a good open source scoring system, and the resulting software would end up being much better than FICO.
        With the present make up the the CA legislature (almost 2:1 Democrats
        and consumer advocates), it is highly unlikely for _any_ anti-consumer
        laws to be passed -- at least in my lifetime.

        BTW, FICO is used for more that just granting credit. The hearings that
        I referred to had a lot to do with the issuing of insurance (homeowners
        in particular) and how insurance companies also use FICO scores for
        giving or denying insurance.

        Also I am only reporting what is going on in CA. I don't necessarily
        agree with such laws or the micro-managing of business relations through
        such laws.

        --
        -Ernie-

        "There are only two kinds of computer users -- those who have
        suffered a catastrophic hard drive failure, and those who will."

        Have you done your backup today?

        Comment


        • #19
          FICO secrets

          In article <[email protected]>, [email protected] wrote:
          On Sat, 15 Apr 2006 04:53:18 GMT, Ernie Klein <[email protected]> wrote:
          denied. It wouldn't outlaw FICO outright, just say that creditorscouldn't use or cite a FICO score to deny credit unless the exact sourceof the FICO score was revealed.
          That seems redundant. They obviously couldn't cite a FICO score if they couldn't use it. So the law should just say they can't use it, not that they can't cite it.
          A law that specially outlaws one companies product probably wouldn't
          stand muster. Since CA already had a strong disclosure law when credit
          is denied, mealy adding an additional requirement that expands the
          nature of the disclosure covers not only the existing FICO but any other
          future systems that may be thought up.
          It should simply say the scoring software has to be disclosed to the victim, and that such disclosure could be in the form of a URL letting the victim download the scoring software and run it on their own credit report to verify it worked. Then a lot of open source programmers would add features to let you experiment with the score, do what-if scenarios, display pie charts showing how much weight each factor had in your own score, etc.
          See above. The law wouldn't care one wit about the method or nature of
          a score or any other method used to determine the granting of credit, it
          would only say that if credit is denied, the actual reason for the
          denial be given to the consumer in a clearly understandable way.
          You can bet if a law were passed requiring all credit scoring software to be open source or not used, then all the credit reporting agencies would get together and form an open source consortium to develop a good open source scoring system, and the resulting software would end up being much better than FICO.
          With the present make up the the CA legislature (almost 2:1 Democrats
          and consumer advocates), it is highly unlikely for _any_ anti-consumer
          laws to be passed -- at least in my lifetime.

          BTW, FICO is used for more that just granting credit. The hearings that
          I referred to had a lot to do with the issuing of insurance (homeowners
          in particular) and how insurance companies also use FICO scores for
          giving or denying insurance.

          Also I am only reporting what is going on in CA. I don't necessarily
          agree with such laws or the micro-managing of business relations through
          such laws.

          --
          -Ernie-

          "There are only two kinds of computer users -- those who have
          suffered a catastrophic hard drive failure, and those who will."

          Have you done your backup today?

          Comment


          • #20
            FICO secrets

            >> Scores aren't divined out of thin air. Each of the three major credit
            bureaus have their own scoring system, and they use their own credit report data to come up with your score. Your "credit score" is simply a representation of one of your credit reports.Well, when the CA legislature held hearings on the matter about 1 yearand a half ago, they couldn't make much sense of it. Several expertwitnesses testified that they studied many credit reports and comparedthe report to the FICO score for the same person and concluded that onecould not predict from the credit report alone what the resulting FICOscore would be.
            A FICO score is supposedly computed from a credit report, which is
            supplied as input, not from information collected by FICO. One
            indication that a FICO score has hidden inputs would be that the
            *SAME* credit report comes back with different scores.

            It wouldn't be that hard to test whether other inputs are being used
            (say, by looking something up by SSN or name from outside) by submitting
            identical credit reports and checking if they get different scores, and
            to detect, say, racial bias by repeating this with the only difference
            being race (which isn't on the credit report). It would be interesting
            to find that otherwise identical credit reports significantly change
            FICO score due only to a change in the ethnicity of the name or the
            last digit of the SSN.
            They presented several pairs of credit reports where one obviously was abetter credit risk than the other, but the better credit risk (in theiropinion based on the credit report) had the lower FICO score. Theyconcluded that the FICO score must be skewed by factors not found in theunderlying credit report. As I recall a FICO representative was calledbut refused to testify citing proprietory business secrets.
            What the CA legislature found was that either FICO or the experts
            don't do a good job of rating someone's risk of default. For all we
            know, the input credit report is never read, but is ground up and used
            in an enema for a psychic, who then reads the spray pattern when it
            is ejected.

            HOW MUCH of a score difference existed in these pairs of reports
            that the CA legislature tried? Perhaps a 50 point difference really
            is insignificant but a 200 point difference is?

            Gordon L. Burditt

            Comment


            • #21
              FICO secrets

              >> Scores aren't divined out of thin air. Each of the three major credit
              bureaus have their own scoring system, and they use their own credit report data to come up with your score. Your "credit score" is simply a representation of one of your credit reports.Well, when the CA legislature held hearings on the matter about 1 yearand a half ago, they couldn't make much sense of it. Several expertwitnesses testified that they studied many credit reports and comparedthe report to the FICO score for the same person and concluded that onecould not predict from the credit report alone what the resulting FICOscore would be.
              A FICO score is supposedly computed from a credit report, which is
              supplied as input, not from information collected by FICO. One
              indication that a FICO score has hidden inputs would be that the
              *SAME* credit report comes back with different scores.

              It wouldn't be that hard to test whether other inputs are being used
              (say, by looking something up by SSN or name from outside) by submitting
              identical credit reports and checking if they get different scores, and
              to detect, say, racial bias by repeating this with the only difference
              being race (which isn't on the credit report). It would be interesting
              to find that otherwise identical credit reports significantly change
              FICO score due only to a change in the ethnicity of the name or the
              last digit of the SSN.
              They presented several pairs of credit reports where one obviously was abetter credit risk than the other, but the better credit risk (in theiropinion based on the credit report) had the lower FICO score. Theyconcluded that the FICO score must be skewed by factors not found in theunderlying credit report. As I recall a FICO representative was calledbut refused to testify citing proprietory business secrets.
              What the CA legislature found was that either FICO or the experts
              don't do a good job of rating someone's risk of default. For all we
              know, the input credit report is never read, but is ground up and used
              in an enema for a psychic, who then reads the spray pattern when it
              is ejected.

              HOW MUCH of a score difference existed in these pairs of reports
              that the CA legislature tried? Perhaps a 50 point difference really
              is insignificant but a 200 point difference is?

              Gordon L. Burditt

              Comment


              • #22
                FICO secrets

                >I'm always suspicious of a company whose business model depends on
                deep secrecy.
                Do you think Secret Sauce contains people? Does the current formula
                for Coca-Cola contain cocaine? Do you think it's prudent for a
                safe manufacturing company to make public its list of safe owners
                and the combinations to the safes? While you may not like closed-source
                software, I don't think there's anything inherently evil about it.
                And I'm even more suspicious of popular opinion aboutthe details of such secrets.
                The accuracy of such opinions are certainly in question.

                Gordon L. Burditt

                Comment


                • #23
                  FICO secrets

                  >I'm always suspicious of a company whose business model depends on
                  deep secrecy.
                  Do you think Secret Sauce contains people? Does the current formula
                  for Coca-Cola contain cocaine? Do you think it's prudent for a
                  safe manufacturing company to make public its list of safe owners
                  and the combinations to the safes? While you may not like closed-source
                  software, I don't think there's anything inherently evil about it.
                  And I'm even more suspicious of popular opinion aboutthe details of such secrets.
                  The accuracy of such opinions are certainly in question.

                  Gordon L. Burditt

                  Comment


                  • #24
                    FICO secrets

                    >> But what if FICO has trouble parsing the information that indicates
                    whether an account is open or closed?It's not that hard to "parse" the information. There isn't muchdiscrepancy or grey area between "open" and "closed."
                    But there often are errors involving that state on the credit report.
                    The report may not have up-to-date data. Or the consumer asked for
                    the account to be closed, and thinks it is, but the creditor ignored him.
                    These errors aren't an issue of "parsing" the credit report, though.
                    The credit bureaus specifically say they act on the information providedto them. Its up to you to make sure that information is accurate, notthe credit agencies.
                    I disagree. It is up to you to make sure that the information is
                    *FAVORABLE TO YOU*, not accurate. You are under no obligation to
                    correct errors you believe are in your favor.

                    Gordon L. Burditt

                    Comment


                    • #25
                      FICO secrets

                      >> But what if FICO has trouble parsing the information that indicates
                      whether an account is open or closed?It's not that hard to "parse" the information. There isn't muchdiscrepancy or grey area between "open" and "closed."
                      But there often are errors involving that state on the credit report.
                      The report may not have up-to-date data. Or the consumer asked for
                      the account to be closed, and thinks it is, but the creditor ignored him.
                      These errors aren't an issue of "parsing" the credit report, though.
                      The credit bureaus specifically say they act on the information providedto them. Its up to you to make sure that information is accurate, notthe credit agencies.
                      I disagree. It is up to you to make sure that the information is
                      *FAVORABLE TO YOU*, not accurate. You are under no obligation to
                      correct errors you believe are in your favor.

                      Gordon L. Burditt

                      Comment


                      • #26
                        FICO secrets

                        On Sat, 15 Apr 2006 19:02:46 -0000, [email protected] (Gordon
                        Burditt) wrote:
                        I disagree. It is up to you to make sure that the information is*FAVORABLE TO YOU*, not accurate. You are under no obligation tocorrect errors you believe are in your favor.
                        I wonder what the ratio of unfavorable to favorable inaccuracies are.

                        Comment


                        • #27
                          FICO secrets

                          On Sat, 15 Apr 2006 19:02:46 -0000, [email protected] (Gordon
                          Burditt) wrote:
                          I disagree. It is up to you to make sure that the information is*FAVORABLE TO YOU*, not accurate. You are under no obligation tocorrect errors you believe are in your favor.
                          I wonder what the ratio of unfavorable to favorable inaccuracies are.

                          Comment


                          • #28
                            FICO secrets

                            >>I disagree. It is up to you to make sure that the information is
                            *FAVORABLE TO YOU*, not accurate. You are under no obligation tocorrect errors you believe are in your favor.I wonder what the ratio of unfavorable to favorable inaccuracies are.
                            Probably at least 10 to 1 in favor of unfavorable. There's probably
                            at least 10 unfavorable items (late payments, etc.) reported
                            (including the fact that late payments get reported repeatedly for
                            years after they happen) for every favorable item on credit reports
                            overall. Assuming the error is putting it on YOUR report instead
                            of the correct person, that makes it 100 to 1 that it will be
                            unfavorable.

                            Just because it is unlikely to happen does not put an obligation
                            on you to correct errors you believe are in your favor.

                            Gordon L. Burditt

                            Comment


                            • #29
                              FICO secrets

                              >>I disagree. It is up to you to make sure that the information is
                              *FAVORABLE TO YOU*, not accurate. You are under no obligation tocorrect errors you believe are in your favor.I wonder what the ratio of unfavorable to favorable inaccuracies are.
                              Probably at least 10 to 1 in favor of unfavorable. There's probably
                              at least 10 unfavorable items (late payments, etc.) reported
                              (including the fact that late payments get reported repeatedly for
                              years after they happen) for every favorable item on credit reports
                              overall. Assuming the error is putting it on YOUR report instead
                              of the correct person, that makes it 100 to 1 that it will be
                              unfavorable.

                              Just because it is unlikely to happen does not put an obligation
                              on you to correct errors you believe are in your favor.

                              Gordon L. Burditt

                              Comment


                              • #30
                                FICO secrets

                                In article <[email protected]>,
                                Ernie Klein <[email protected]> wrote:
                                In article <[email protected]>, Larry <[email protected]> wrote:
                                If FICO scores were that easily predictable, the company that comes up with them would be out of business, since they wouldn't be necessary.
                                Exactly. That's why why I took exception to what you said above: "Your "credit score" is simply a representation of one of your credit reports." If one is denied credit because of their FICO _score_, pulling their credit report won't necessarily give a clue as to why they were *really* denied credit because FICO contains other _unknown_ (to everyone except FICO) things.
                                Is it because FICO considers unknown factors in addition to what's in
                                your credit report, or is it that FICO considers the entries in your
                                credit report and gives unknown weight and significance to different
                                things that appear therein? I think it's the latter.
                                I regularly (once a year) get my credit reports from the three main credit bureaus. My scores from each are generally in the same ballpark, but they're not identical. Each one has their own formula and weight different factors differently.
                                They presented several pairs of credit reports where one obviously was a better credit risk than the other, but the better credit risk (in their opinion based on the credit report) had the lower FICO score. They concluded that the FICO score must be skewed by factors not found in the underlying credit report.
                                So you've just made the argument FICO scores are not completely accurate representations of the credit-worthiness of the person. So what? No one said they're perfect. The argument being put forward in the CA hearings was that people denied credit because of their FICO scores have no recourse and can't really find out the real reason they were denied credit, notwithstanding Federal and State laws to the contrary, because FICO is secret and not even subject matter experts can figure why that person was denied credit based on their credit report.
                                Who said you need recourse? A lender can deny you credit without
                                providing a reason, unless applicable law says otherwise.

                                As I recall a FICO representative was called but refused to testify citing proprietory business secrets. As would be expected. I believe one CA Senator attempted to introduce a bill last year and may try again this year to outlaw the use of FICO scores in giving or denying credit unless the person seeking the credit is given full disclosure as to exactly what the FICO numbers mean, where they come from and how they are arrived at. In other words, if the law passes, they will not be able to deny credit based on any secret or proprietary methods but will have to say exactly why the credit was denied. It wouldn't outlaw FICO outright, just say that creditors couldn't use or cite a FICO score to deny credit unless the exact source of the FICO score was revealed.
                                I would think this law would have serious commerce clause problems.

                                Comment

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