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  • FICO secrets

    I'm always suspicious of a company whose business model depends on
    deep secrecy. And I'm even more suspicious of popular opinion about
    the details of such secrets.

    Popular opinion is that FICO is the most widely used score, by a wide
    margin. But how does popular opinion know that? Do companies that
    check our credit tend to disclose what score system they use?

    Popular opinion is that FICO treats open accounts drastically
    differently than closed accounts. That opinion might exist for the
    sole reason that it's pretty ****ed obvious that the difference
    between closed and open accounts should be given a lot of weight.

    But what if FICO has trouble parsing the information that indicates
    whether an account is open or closed? Or what if that information
    tends to not be consistent and reliable? Wouldn't it be equally
    reasonable for FICO to parse something easier, as a secondary
    indicator, and ignore the actual indication of open/closed? They
    might parse the date of last activity, and make assumptions about
    inactive accounts being less important, while ignoring the actual
    open/closed status of the account.

    How would anyone know such things, unless they knew the FICO formula
    in detail? Without that knowledge, it's all just speculation. And
    the more research I do on FICO scores, the more I think popular
    opinion might be the most speculative of all.


  • #2
    FICO secrets

    In article <[email protected]>, [email protected] wrote:
    I'm always suspicious of a company whose business model depends on deep secrecy.
    Well, if FICO released their formula, they'd be out of business, since
    no one would need them.
    And I'm even more suspicious of popular opinion about the details of such secrets. Popular opinion is that FICO is the most widely used score, by a wide margin. But how does popular opinion know that?
    You contradict yourself. What gives you the idea that popular opinion
    says FICO is so widely used?
    Do companies that check our credit tend to disclose what score system they use?
    Yes, usually.

    And federal law says that if you're denied credit due to their reliance
    on a score, you have the right to know what credit report they relied
    on, and to get a free copy of that credit report.
    Popular opinion is that FICO treats open accounts drastically differently than closed accounts. That opinion might exist for the sole reason that it's pretty ****ed obvious that the difference between closed and open accounts should be given a lot of weight.
    Obviously.

    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 much
    discrepancy or grey area between "open" and "closed."
    Or what if that information tends to not be consistent and reliable?
    The credit bureaus specifically say they act on the information provided
    to them. Its up to you to make sure that information is accurate, not
    the credit agencies.
    Wouldn't it be equally reasonable for FICO to parse something easier, as a secondary indicator, and ignore the actual indication of open/closed? They might parse the date of last activity, and make assumptions about inactive accounts being less important, while ignoring the actual open/closed status of the account.
    Except making "assumptions" is worse than taking known quantities such
    as open/closed. Indeed, an account that hasn't been used for years
    could be closed (which could be good for your credit score or bad,
    depending on why it was closed) or open, but unused (which could also be
    good or bad for your credit score, depending on why it hasn't been used
    in so long).
    How would anyone know such things, unless they knew the FICO formula in detail? Without that knowledge, it's all just speculation. And the more research I do on FICO scores, the more I think popular opinion might be the most speculative of all.
    Again, you contradict yourself. If popular opinion is speculative about
    FICO, then why does it matter?

    In any event, we all know that FICO scores depend on your credit
    history. So get a copy of your credit report and make sure its accurate.

    Comment


    • #3
      FICO secrets

      In article <[email protected]>, [email protected] wrote:
      I'm always suspicious of a company whose business model depends on deep secrecy.
      Well, if FICO released their formula, they'd be out of business, since
      no one would need them.
      And I'm even more suspicious of popular opinion about the details of such secrets. Popular opinion is that FICO is the most widely used score, by a wide margin. But how does popular opinion know that?
      You contradict yourself. What gives you the idea that popular opinion
      says FICO is so widely used?
      Do companies that check our credit tend to disclose what score system they use?
      Yes, usually.

      And federal law says that if you're denied credit due to their reliance
      on a score, you have the right to know what credit report they relied
      on, and to get a free copy of that credit report.
      Popular opinion is that FICO treats open accounts drastically differently than closed accounts. That opinion might exist for the sole reason that it's pretty ****ed obvious that the difference between closed and open accounts should be given a lot of weight.
      Obviously.

      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 much
      discrepancy or grey area between "open" and "closed."
      Or what if that information tends to not be consistent and reliable?
      The credit bureaus specifically say they act on the information provided
      to them. Its up to you to make sure that information is accurate, not
      the credit agencies.
      Wouldn't it be equally reasonable for FICO to parse something easier, as a secondary indicator, and ignore the actual indication of open/closed? They might parse the date of last activity, and make assumptions about inactive accounts being less important, while ignoring the actual open/closed status of the account.
      Except making "assumptions" is worse than taking known quantities such
      as open/closed. Indeed, an account that hasn't been used for years
      could be closed (which could be good for your credit score or bad,
      depending on why it was closed) or open, but unused (which could also be
      good or bad for your credit score, depending on why it hasn't been used
      in so long).
      How would anyone know such things, unless they knew the FICO formula in detail? Without that knowledge, it's all just speculation. And the more research I do on FICO scores, the more I think popular opinion might be the most speculative of all.
      Again, you contradict yourself. If popular opinion is speculative about
      FICO, then why does it matter?

      In any event, we all know that FICO scores depend on your credit
      history. So get a copy of your credit report and make sure its accurate.

      Comment


      • #4
        FICO secrets

        In article <[email protected]>,
        Larry <[email protected]> wrote:
        In article <[email protected]>, [email protected] wrote:
        Do companies that check our credit tend to disclose what score system they use? Yes, usually. And federal law says that if you're denied credit due to their reliance on a score, you have the right to know what credit report they relied on, and to get a free copy of that credit report.
        But if you are denied credit based on a *score* and not a credit report,
        and the basis of that score is proprietary even to the lender who denied
        the credit, then what good is the right to a free credit report, when
        the lender says we denied credit based on your score and _not_ your
        credit report and we can't tell you why your score was low because even
        _we_ don't know and the scoring company keeps it a secret.

        What does the federal law have to say about that?

        --
        -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


        • #5
          FICO secrets

          In article <[email protected]>,
          Larry <[email protected]> wrote:
          In article <[email protected]>, [email protected] wrote:
          Do companies that check our credit tend to disclose what score system they use? Yes, usually. And federal law says that if you're denied credit due to their reliance on a score, you have the right to know what credit report they relied on, and to get a free copy of that credit report.
          But if you are denied credit based on a *score* and not a credit report,
          and the basis of that score is proprietary even to the lender who denied
          the credit, then what good is the right to a free credit report, when
          the lender says we denied credit based on your score and _not_ your
          credit report and we can't tell you why your score was low because even
          _we_ don't know and the scoring company keeps it a secret.

          What does the federal law have to say about that?

          --
          -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


          • #6
            FICO secrets

            In article <[email protected]>,
            Ernie Klein <[email protected]> wrote:
            In article <[email protected]>, Larry <[email protected]> wrote:
            In article <[email protected]>, [email protected] wrote: Do companies that check our credit tend to disclose what score system they use? Yes, usually. And federal law says that if you're denied credit due to their reliance on a score, you have the right to know what credit report they relied on, and to get a free copy of that credit report.
            But if you are denied credit based on a *score* and not a credit report, and the basis of that score is proprietary even to the lender who denied the credit, then what good is the right to a free credit report, when the lender says we denied credit based on your score and _not_ your credit report and we can't tell you why your score was low because even _we_ don't know and the scoring company keeps it a secret. What does the federal law have to say about that?
            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.

            Comment


            • #7
              FICO secrets

              In article <[email protected]>,
              Ernie Klein <[email protected]> wrote:
              In article <[email protected]>, Larry <[email protected]> wrote:
              In article <[email protected]>, [email protected] wrote: Do companies that check our credit tend to disclose what score system they use? Yes, usually. And federal law says that if you're denied credit due to their reliance on a score, you have the right to know what credit report they relied on, and to get a free copy of that credit report.
              But if you are denied credit based on a *score* and not a credit report, and the basis of that score is proprietary even to the lender who denied the credit, then what good is the right to a free credit report, when the lender says we denied credit based on your score and _not_ your credit report and we can't tell you why your score was low because even _we_ don't know and the scoring company keeps it a secret. What does the federal law have to say about that?
              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.

              Comment


              • #8
                FICO secrets

                In article <[email protected]>,
                Larry <[email protected]> wrote:
                In article <[email protected]>, Ernie Klein <[email protected]> wrote:
                In article <[email protected]>, Larry <[email protected]> wrote:
                In article <[email protected]>, [email protected] wrote: > Do companies that > check our credit tend to disclose what score system they use? Yes, usually. And federal law says that if you're denied credit due to their reliance on a score, you have the right to know what credit report they relied on, and to get a free copy of that credit report.
                But if you are denied credit based on a *score* and not a credit report, and the basis of that score is proprietary even to the lender who denied the credit, then what good is the right to a free credit report, when the lender says we denied credit based on your score and _not_ your credit report and we can't tell you why your score was low because even _we_ don't know and the scoring company keeps it a secret. What does the federal law have to say about that?
                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 year
                and a half ago, they couldn't make much sense of it. Several expert
                witnesses testified that they studied many credit reports and compared
                the report to the FICO score for the same person and concluded that one
                could not predict from the credit report alone what the resulting FICO
                score would be.

                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. As I recall a FICO representative was called
                but refused to testify citing proprietory business secrets.

                --
                -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


                • #9
                  FICO secrets

                  In article <[email protected]>,
                  Larry <[email protected]> wrote:
                  In article <[email protected]>, Ernie Klein <[email protected]> wrote:
                  In article <[email protected]>, Larry <[email protected]> wrote:
                  In article <[email protected]>, [email protected] wrote: > Do companies that > check our credit tend to disclose what score system they use? Yes, usually. And federal law says that if you're denied credit due to their reliance on a score, you have the right to know what credit report they relied on, and to get a free copy of that credit report.
                  But if you are denied credit based on a *score* and not a credit report, and the basis of that score is proprietary even to the lender who denied the credit, then what good is the right to a free credit report, when the lender says we denied credit based on your score and _not_ your credit report and we can't tell you why your score was low because even _we_ don't know and the scoring company keeps it a secret. What does the federal law have to say about that?
                  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 year
                  and a half ago, they couldn't make much sense of it. Several expert
                  witnesses testified that they studied many credit reports and compared
                  the report to the FICO score for the same person and concluded that one
                  could not predict from the credit report alone what the resulting FICO
                  score would be.

                  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. As I recall a FICO representative was called
                  but refused to testify citing proprietory business secrets.

                  --
                  -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


                  • #10
                    FICO secrets

                    In article <[email protected]>,
                    Ernie Klein <[email protected]> wrote:
                    In article <[email protected]>, Larry <[email protected]> wrote:
                    In article <[email protected]>, Ernie Klein <[email protected]> wrote:
                    What does the federal law have to say about that?
                    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 year and a half ago, they couldn't make much sense of it. Several expert witnesses testified that they studied many credit reports and compared the report to the FICO score for the same person and concluded that one could not predict from the credit report alone what the resulting FICO score would be.
                    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.

                    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.
                    As I recall a FICO representative was called but refused to testify citing proprietory business secrets.
                    As would be expected.

                    Comment


                    • #11
                      FICO secrets

                      In article <[email protected]>,
                      Ernie Klein <[email protected]> wrote:
                      In article <[email protected]>, Larry <[email protected]> wrote:
                      In article <[email protected]>, Ernie Klein <[email protected]> wrote:
                      What does the federal law have to say about that?
                      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 year and a half ago, they couldn't make much sense of it. Several expert witnesses testified that they studied many credit reports and compared the report to the FICO score for the same person and concluded that one could not predict from the credit report alone what the resulting FICO score would be.
                      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.

                      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.
                      As I recall a FICO representative was called but refused to testify citing proprietory business secrets.
                      As would be expected.

                      Comment


                      • #12
                        FICO secrets

                        In article <[email protected]>,
                        Larry <[email protected]> wrote:
                        In article <[email protected]>, Ernie Klein <[email protected]> wrote:
                        In article <[email protected]>, Larry <[email protected]> wrote:
                        In article <[email protected]>, Ernie Klein <[email protected]> wrote: > > What does the federal law have to say about that? 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 year and a half ago, they couldn't make much sense of it. Several expert witnesses testified that they studied many credit reports and compared the report to the FICO score for the same person and concluded that one could not predict from the credit report alone what the resulting FICO score would be.
                        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.
                        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.
                        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.

                        --
                        -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


                        • #13
                          FICO secrets

                          In article <[email protected]>,
                          Larry <[email protected]> wrote:
                          In article <[email protected]>, Ernie Klein <[email protected]> wrote:
                          In article <x-81D6A6.23153714[email protected]>, Larry <[email protected]> wrote:
                          In article <[email protected]>, Ernie Klein <[email protected]> wrote: > > What does the federal law have to say about that? 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 year and a half ago, they couldn't make much sense of it. Several expert witnesses testified that they studied many credit reports and compared the report to the FICO score for the same person and concluded that one could not predict from the credit report alone what the resulting FICO score would be.
                          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.
                          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.
                          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.

                          --
                          -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


                          • #14
                            FICO secrets

                            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. 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.

                            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.

                            Comment


                            • #15
                              FICO secrets

                              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. 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.

                              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.

                              Comment

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