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onehunglow

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  1. Thats interesting about the modeling staff and the IT staff.... The guy I sat with was definitely an IT guy - but pretty high up ...i would say project manager or senior computer systems analyst level He did chuckle when I asked him for the "secrets"...as if to say "why do you want them?". But when I told him that my score was different from the 3 credit bureaus, he looked puzzled and said that they SHOULD be the same ..IF all three bureaus have exactly the same data - the issue is that they don't ...some companies report to one and not the other, etc. And here is another twist ...the FICO calculation program/scoring/model ...or whatever you want to call it ...is programmed not in Java ...or C++ ..or Foxpro or anything like that The program that returns scores based on data is written in .....COBOL.... !!! The conference I was at was a COBOL conference (yes that language still very much exists) ...and this guy works in IT but not in the accounting dept, but in the FICO scoring or modeling program! (Fo those non-technical people, COBOL is considered by many to be an old dead language ...but yet as we all discovered in this conference still processes 80% of the worlds financial data!) In any case, you can imagine the shock and pleasant surprise to discover that I am at the same table as this guy with "Fair Isacc" on his name badge. And he was very forthcoming - not really disclosing the coke recipe but being helpful as to how FICO scoring is done - and allowing me to take copious notes. But what surprised me is the letter I received on the myFico boards when I published this - to - what I believed were the masses....but obviously the moderator was a Fair Isaac employee who ripped my blog off and warned me not to disclose that information (at least on their site). That hit me that I must have nailed it right on - or else why would they care. But I find the boards here informative and notice good intelligent debate and communication with some pretty knowledgeable people.....so I decided to share... some of you thinks its all old news....and some think its useful If I made one person happy with all of this....I am okay with that
  2. I meant credit margins that are offered to bank's personal account holders - much like a "line of credit" to a business - banks grant a "credit margin" or maximum credit that a bank account can go into arrears. Its a credit product that can have a revolving credit type of activity. If you apply for a "home renovation loan" for lets say $20000 - instead of giving you a check for $20000 and set monthly payments, they give you line of credit that you can withdraw or write checks to various contractors as you need it. A fixed loan has a fixed term, lets say 2 years, where the balance diminishes to zero - if you need more, you have to re-apply. A line of credit could start at 0, go "up to" the credit margin and fluctuate up and down as the money flows out and you pay some back- very much like a credit card except the banks charge much less interest than credit cards on the outstanding amount and there is no 'minimum monthly payment'. You have to have outstanding credit with a bank for this type of credit line and it may be secured with your mortgage.
  3. The word "secrets" was used because the details in the first "post" came from a person I met at a trade show who worked at Fair Isaac - an IT person who gave me information as to how the scoring works He first claimed that the information used to compute a score was listed in various places....but when I told him that only the percentage counts of each category were published, and not HOW each category is computed with itself He then explained (in quite good detail!) how each of the categories are treated...and how one thing may affect one and adversely another, etc. He showed me this computation by asking me questions and manually figuring out my FICO ...and it was within 10 points. All this written on the back of the show guide white pages. We did 3 scenarios and he explained the ups and downs - what affects what ...etc. I kept those notes and submitted them to the creditboards. I am sure that there are smart people that know bits and pieces and you can find various information scattered all around - but I checked to see if a post existed that explained this in this much detail and did not. Actually I posted this first on the myFICO board ...and it was met with alot of responses in 24 hours...then I received a scathing email from the moderator stating that I was divulging "the company secrets" - his words exactly, and where did I get them from? I was the one who told him that this info MUST exist in other places and I was only being a 'contributor' to others who are interested in finding out how th escoring system works. The did not reply but removed my post and probably disabled my account by now too. This action seemed to indicate that I had indeed "hit the nail on the head" and found out the so-called "secrets". So - if this information is all so public knowledge - then someone cut and paste my original post and post it on myFico and see what happens!!
  4. Want to get your FICO score up to the minute at any time? Get a Washington Mutual Visa card . Part of the benefit is of course your account details online, bill payments, etc but you also get a CREDIT PROFILE which shows your FICO score from all 3 agencies as of their last reporting date (ANd they display a graph of your last 12 months of past scores too) - not a penny extra - you don't even need to carry a balance on the card I've had this card for 3 years - its great ...and i laugh when I see all these email ads that charge you $39.95 a month to look at your score. https://www.wamucards.com/ola/base/Login kudos to wamu!
  5. Just to clarify things as I understood them -Installment loans (ones that the bank or lending institution makes out) count higher in the portion of the FICO score that deals with credit MIX. The one with the 'basket'. Every current loan (in that category) gets high marks - much higher than a credit card - and the more instalment loans the better. Credit cards get points in ths category too UP TO A LIMIT I was told, then you LOSE points if you have too many. In the credit mix category, they don't look at values, credit limits, outstandings, etc - just the fact that you have them (other categories take into consideration your balances, owings,etc but not this one). In other words, one should have a healthy BALANCE of credit - not just credit cards. The person listed on this site with 10 credit cards and total credit limit of $100,000 scores LOW in the credit mix but will score higher in the 'balance to limit ratio' category if the balances are low and score higher in the 'payment history' category if everything is kept up to date. Mortgages in general mean little UNLESS they are paid late. Mortgages fall into a special category because 1) most people have a home - a roof over your head is an essential part of life ...so its like a level playing field 2) the outsanding amount is usually very high in relation to normal optoinal credit (like $400k) and is not the same as having a $400k card credit limit so should not be counted in the 'total outstanding' - you may be in trouble owing $20000 to Mastercard but owing $20000 to a mortgage company secured by the house means nothing, and 3) mortgages are secured by the house itself. Mortgages are also treated differently as far as credit INQUIRIES go - you are dinged everytime you apply for a credit card (since acquiring new credit may be a 'red flag') but mortgage applications do not count at all - you can have 12 of them ...and you have that right since it is considered okay to "shop around" for mortgages without penalty. However- -default on your mortgage and a bank may act quicker than credit cards to repossess that house - resulting in a judgement against you (which is a KILLER in yoru credit file - ask anyone who has one ...what that does to your score!). Credit cards going in default rarely get judgments against you -they just go to collections. Judgements are near impossible to have removed from your credit file since only the courts can impose or remove them. (and they only remove them if there was an error). You may be able to sweet-talk your bank or collection agency to remove a 'collection' entry but courts have no incentives, desire or inclination to remove a judgement no matter what you say, plead or promise. Just a word of advice.... Maybe some out there can tell us what judgements have doen to their FICO score!
  6. As far as old news/news to some - take it the way you want. This is a forum for ideas, sharing, information, etc. Of course there may be duplicate information somewhere...but what YOU may already know...might be helpful to others.
  7. re: instalment loans They are apparently viewed differently because 1) they are harder to get - requiring a face to face with a loan officer, a reason and a supervisor approval and 2) they work on a diminishing balance (ie: you start with a 'limit' of $5000 lets say and it goes down as every month is paid - not up. With a credit card they start at 0 balance with a credit limit which you can "max out" - an installment loan goes the other way - each month sees it as approaching zero. Ironically I feel that installment loans don't 'really' measure your money management skills -since monthly payments come out of your bank account usually - in other words they 'auotmatically' pay themselves off (as long as you have the cash in the account) whereas credit cards require you to ensure that you make your payments (which to me is the true test of financial worthiness, but I digress) But you can see the differenciation on credit reporting: Installment loans have an 'I' (I1 to I9) and credit cards are revolving credit and have an 'R' (R1-R9) - the ones being the best and nines being 'write offs' According my notes though, Installment loans in the "types of credit" category carry a much higher weighting regardless of their value, so in that category they mean more. But if you happen to pay one late, that carries as bad a mark in the 'payment history' category as credit cards.... key point here - (and this comes from the Mr. Fair Isaac IT guy's mouth) - ensure that no account is paid late , even if you have to make a minimum payment ..beg borrow or steal and make those payments. Even one late payment on an account negates months of on-times. Put those due dates in your Blackberry, Palm Pilot, Outlook whatever...but make those payments!
  8. Credit reports do not differentiate the TYPE of credit card (secured/unsecured, prime/subprime) per se... in the coding. But the NAME of the card appears. And savvy loan or mortgage officers know what is what. There are some companies that ONLY give sub-prime cards - therefore the name is a giveaway. So if you are going to get a secured or sub-prime card, choose a card with a company that supplies BOTH types - that way it is not obvious which one you have Also, instalment loans do not specify if collateral is being held by the bank. So. no one knows if the loan was granted on your own merit or because you shored it up with a security deposit. and to the person that pointed out the 300-850 range...you are correct ...I wonder how bad a report has to be to have a 300 score!...
  9. Yes, the percentage makeups are published and we all know them....but I was curious how the scores were derived from them. And as I found out...each category is quite different in the way it is computed ...and comes out to a points system. Then they add up each set of points to get the score. Kind of like a school course - the final mark is made up of 40% of this, 30% of that, etc...but good to know exactly what they do in each category. I had this idea to set up a website where anyone can go to - plug in their vital data (basic data not creditor names) that they pulled from their credit report, and get a score....now that I have a good idea how it is derived. Then allow you to "play" with some of the numbers and see what it does. Knowing the formulas explain a few things - particularly why paying off an account in collection may have little or no effect in the FICO score- the reason being the penalty for an account in collection is so great that diminishing the amount owing (and therefore your 'total credit outstanding') has limited impact. Thus the push to get that collection account removed altogether is so important. Another thing which surprised me - mortgages, however big or period of time, have also little impact on the score - because it does not affect your 'total credit' (for mortgages). Late payments DO count though. And so after I spent an afternoon with the Fair Isaac guy taking copius notes, I asked him whats the worst and best thing someone can do - and his answer is probably not surprising.... worst thing on your credit file - judgements with outsanding balances worst in general - paying even small accounts late - 60 days late on a $10 minimum $200 Sears balance is just as bad as it would be on a $4000 credit limit! That means not paying $10 is equal to not paying $500 - if that is your minimm payment. and the secret to bringing up the score .....drumroll.... Installment loans - the ones that the bank gives you. 2 loans of $2500 gives you twice the 'good' power as one $5000 loan! So for those needing to rebuild credit (but you need some cash for this) - take out installment loans with your bank and pay them off early. No matter how bad your credit is, a bank will lend you the money with the same amount as collateral. For instance, you have a $2500 CD. You offer the CD as collateral towards a $2500 loan. The CD continues to generate interest (it doesn't have to be cashed in to be collateral) - and you take out the loan. Of course, you don't 'need' the money (or shouldn't) - and pay back the loan for a minimum of 3 payments (and see if you can pay the 'balance' off then). The loan gets the highest marks as what it is ...original balance is $2500 balance is $0. This stays on your file for 6-7 years depending on yoru state! Now some banks do not 'close' the loan - therefore reporting that you have a 'credit limit' of $2500 and a balance of $0 (ups your availabe credit). Another fact I was told is to apply for loans during the last few days of the month - since loan officers have quotas too! And try and get them without collateral if possible. Good to know that loans are not reported whether they are 'secured' or not. In other words your credit repor t does not disclose that the loan was granted because you had collateral - just that it was granted. Then do it again - the idea is that instalment loans count more being 'recent' than ones years ago. and last but not least - credit cards are mainly viewed as negative - even if you have 10 cards with high limits ...it is possible you can go out one day and 'blow it all' - rack up the balances...but you cannot do that with loans...thats why the latter are viewed much more favorably. what a weird science this is!!!
  10. Note: I had posted the information below on the myFico site and received great feedback, and them received word that my post would be removed because it divluged their own "secret" formula. Actually it does not give specifics, nor can you take this information and set up a competing FICO operation, but apparently it is too close to the exact calculation for their comfort. Again, no Coke recipe here but if you want to know how the particular elements in each of your credit history make up the final score, this will explain all the "magic" behind the numbers. ---as posted--- I had a chance to spend some time and chat with a Fair Issac IT employee at a recent trade show, and of course I brought up the subject of the FICO scores and their secrecy. He did admit that the official scoring IS secret, but is not that complicated to figure out given "everything that is disclosed publicly". The way scores are calculated are due to "weighting" - so if someone has some math backround, this sounds familiar. First of all he says, scores are only within a specific range (I think I read 350 to 850 or something like that...that is there is no 'zero' score nor is there a 999 score) the actual range is 100% so 850-350=500 represents 100% every percentage counts as 5 points in that category....). It is apparently therectically impossible to score the lowest or the highest (like reaching infinity). Now the 500 points (or 100%) is distributed as follows: You start at 350 points - everyone gets that 35% (or 175 points) is 'payment history' 30% (or 150 points) is 'amounts owed' 15% (or 75 points) is 'length of credit history' 10% (or 50 points) is 'new credit' 10% (or 50 points) is 'types of credit' --------------------------------------- 100% or 500 points Each category is calculated in its own way due to the nature of what it contains, for instance 'new credit' simply reduces scoring the more numbers (ie: inquiries) are put in there whereas 'payment history is the most complex requiring calculating number of accounts, average days due, length of account, etc) Certain categories start out in the middle and + or - depending (like payment history) and some start out at max and go down as the numbers increase. For instance, in the 'new credit' (which is the simplest apparently), you start with 50 points and it goes down by 10 every time you have a new credit app within the past 6 months. That number changes to 5 as the 3 months moves to 6 months and goes down to zero after a year. For instance you applied for a card this month, you lose 10 points. Apply for another, bang, another 10 points. You are down 20 points. as you pass the 3 months mark without applying for any new credit, the 20 becomes 10 - therefore you simply "gain" 10 points as time goes on. At the 6 month mark, you gain another 5 (as long as no new credit is applied for) and then another 5 at the one year mark. Now it sounds like you are GAINING points - but actually you are only winning them BACK from being lost. Types of credit category: you start with 0. Now this is a 'portfolio' category. The 50 points "basket" is evaluated on the type of credit you have. Installment loans, or credit margins give you the MAX - the are harder to get and have a fixed monthy payment. 'Good credit' users have a healthy mix - like 2 installment loans and 2 credit cards and no finance loans. You get points mainly for a healthy mix - not just a number of credit cards. The numbers are something like 20 for Installment, margins, and car loans and 10 for credit cards up to 4, then you lose points (on CC's only). You lose points by having finance company loans (since their interest rates are highers and they are lenders of last resort and frequntly loans are 'secured' by home equity or a co-signer). The stronger your basket is, the higher your number goes - up to a max of 50 points of course. Amounts owed category is "weighted". Basically it is credit used divided by credit available. The used divided by available factor is inversely scored. Mortgages do not count here. For instance, Having $20000 of credit and carrying all $20000 will give you very low points - maybe 10 points only out of 150 possible. But carrying a balance of 0 on $20000 available will score you close to 150 points! That means that although you have high credit limits, you don;t need or use that credit - a good risk and indication of good money management. Maxing out all credit limits (ie $20,000 owing on $20,000) will give you very few points - not 0 but something like 10. However the higher the AVAILABLE credit number will give you more points. In other words 0/$500 does not carry the same as 0/$8000. And I was told that THIS category has the most significant impact. Keeping your balances low or nil will yield you close to 150 points reagrdless of any time element involved. Fin out when credit cards post their oustanding balances (usually it is your statement date but may be different) and make sure you can get your balanace paid off by that date - and then watch your score shoot up. Length of credit history (75 points) is some convaluded formula that adds more points the longer you have credit history reporting for you. Basically it is 0 points when you start and maxes out at 75 if you have something like 40 years - which for most is around 58 years old !!! The MORE older accounts you have the better, and accelerates the score. Apparently they use points for months time accounts (ie 2 accounts x 200 months plus 2 accounts x 10 months plus 1 account x 5 months would give 425 month-accounts over a number like 800 = 54% and therefore give you 40 points out of 75 which is the percentage. Payment History is a whopping 175 points and is the most complex. Late payments are killers here apperently. One late payment on an installment loan can wipe away 5 years of good payments. 60 days and 90 days erode your score in this category faster than water on your sandcastles. Collections are like grenades. And there is no easy fix except time and consistent good payments. The max is around 175 if all your accounts in the past 6-7 years are paid on time. ALL of them. Late payments are weighted (mean more) if they are more recent....and tend to be less destructive as they appear in the past. They "weight" these by looking at each account, seeing the reporting per month and seeing if each month was on time, 30 days late, 60, etc. They are not kidding when they say "pay your accounts on time". At least the minimums. Paying more than minimum does not count here (THAT will come up in the extended credit section if your balances are too high). They only want to see your payment history. Apparently there is no leeway or tolerance in this section. This tells them (creditors) how serious you are in paying your bills. So out of the 5 sections, each one calculated on their own merits, they add up the results and come up ith your credit score. 350 + (165 + 110 + 67 + 40 + 40) = 772 So I did not walk away with the formula for Coke ...but I did get a general idea about how it all works.

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