[porscheguy]

(12-29-2017 08:46 AM)Repo Wrote:  

There is actually a chance that this will start to make credit bureau's obsolete. Right now some merchants simply choose not to report to credit bureau's because they are terified of what could happen if a customer disputes something, and draws out a lawsuit if they aren't happy with the result, even if they are wrong. So it can be easier to just not report things. Over time because of things like this, credit bureau's are getting less and less accurate or useful, and companies are always looking at how to get a leg up on the competition. FICO scores for example are a complete joke when it comes to predicting who will charge off, which is what they were originally designed for. Now practically nobody but small institutions use it for data models.

Anyway, alot of things are still uncertain how exactly this will turn out, but very interesting and scary.

I’ve disputed a few things on credit reports. Basically, I had a few bad debts and the creditor offered me a settlement which I paid in full. Went back and checked my report to see a balance still owed. I called the creditor, and they were like “fuck you, you still owe us money.” I said “no, fuck you, you sent me a letter saying paid in full, now update my credit report.” They said they didn’t have to. So I went to equifax and made a dispute. The first thing the bureau does when they investigate is ask the creditor to provide updated info. The fair credit reporting act obligates the creditor to report accurately. So they reported a balance of 0, paid in full.

I’d guarantee that 95% of the people with a mortgage, 1-2 current car loans, $30k in available credit with minimal usage, and 750+ fico score are in no danger of defaulting on their loans regardless of having atm withdrawals for whorehouses and online poker. The majority of people with 700+ fico scores are a pretty safe bet. People 650-700 may have a few late payments, but probably won’t discharge. 600-650 are a risk but you’ll get them with some userous interest. Below 600 are the really high risk people. The banks know this. The only reason they want to rely on internal modeling is so they don’t have to pay the credit bureaus, so they can side step the fair credit reporting act, and try to squeeze more money out of responsible borrowers while citing some arbitrary financial activity as making them high risk.

Saying fico scores are a bad predictor of future behavior are like the people who say SATs are a poor predictor of college graduation. It may not have very good reliability or validity, but do you have something better? When it comes to the test, there is nothing better and that’s why the SAT, warts and all, is the gold standard. I would bet a fico score is better at predicting credit worthiness, than the SAT is at predicting college success. Because the fico score relies on previous behavior whereas the SAT does not.

The banks use of internal credit worthiness modeling is for the reasons I stated above, and to try to wind back the clock to a time when consumers had little to no access to their credit report, thus leaving them at the mercy of the banks.

You’ll have an 800 fico, and the bank will label you high risk because you make too many purchases at 7-11 within a few hours of going to the grocery store. Some (((motherfucker))) in the corporate office will argue “this guy can’t even remember to buy the cool whip on the grocery list how can we trust him to pay for this boat?” That’s the truth of the matter.