Jump to content

Fact checking a supposed Fico 10 wrinkle


Flashman
 Share

Recommended Posts

I was listening to a credit repair consultant (well, a self-titled one, anyway) recently and they mentioned something about FICO 10 that I found rather unsettling.

 

Briefly, this person made the claim that, under the FICO 8 model, a consumer could borrow up to 30% of their total available credit and their credit score would not be negatively affected; so far so good.  The disturbing bit was that she then went on to claim that under the FICO 10 model, a consumer could now borrow up to 50% of their total tradelines without any adverse effects.  Sounds good, yes?  Well, the catch is that if the consumer does not borrow 50% of their tradelines, their credit score under FICO 10 can be expected to go down.

 

This person then went on to lament that a fair number of her clients were now going into debt in order to maintain a high score.

 

Is there anything to this?  Or were they talking rot?  I am not sure how seriously to take this claim myself, but I am sure someone here does.

 

 

 

 

Edited by Flashman
clarity
Link to comment
Share on other sites

  • Flashman changed the title to Fact checking a supposed Fico 10 wrinkle

I highly doubt that this is true as it would be completely contrary to all prior FICO models.  And I am not aware of anybody utilizing FICO 10 as it was just announced last year and transitioning to a new FICO scoring model is a major undertaking for any financial institution and who would want to transition to a new model during a pandemic and staffing shortages? 

 

I know of several credit unions that recently transitioned from FICO 8 to FICO 9 and this all happened just prior to the pandemic, so I don't really expect to encounter FICO 10 anytime soon.

Link to comment
Share on other sites

22 minutes ago, Rogue said:

I highly doubt that this is true as it would be completely contrary to all prior FICO models. 

 

That could well be, but wouldn't a FICO model that required people to carry debt to maintain a high score be considered ideal by the financial sector? 

 

Consider: how much money do they currently lose to people who PIF every month?  And how much money would they stand to make off of these same people if they could, somehow, be compelled to carry debt in order to maintain a good score?

 

Quote

I know of several credit unions that recently transitioned from FICO 8 to FICO 9 and this all happened just prior to the pandemic, so I don't really expect to encounter FICO 10 anytime soon.

 

If they perceive that they are losing money under the current FICO models, is it just possible that the card companies/CRAs may move to adopt FICO 10 quickly rather than delaying their adoption of it?
 

I get that credit unions are the good guys (in relative terms), but I cannot see greedy, multi-billion dollar corporations leaving money on the table like that.

 

 

 

 

 

Link to comment
Share on other sites

5 hours ago, Flashman said:

 

That could well be, but wouldn't a FICO model that required people to carry debt to maintain a high score be considered ideal by the financial sector? 

 

Consider: how much money do they currently lose to people who PIF every month?  And how much money would they stand to make off of these same people if they could, somehow, be compelled to carry debt in order to maintain a good score?

 

 

If they perceive that they are losing money under the current FICO models, is it just possible that the card companies/CRAs may move to adopt FICO 10 quickly rather than delaying their adoption of it?
 

I get that credit unions are the good guys (in relative terms), but I cannot see greedy, multi-billion dollar corporations leaving money on the table like that.

 

The very simple workaround IF Fair Isaac tried to get stupid like that would be to permit the new charges to report while still paying them off as soon as the new statement cut.  It would NOT require that one 'carry' debt and incur any manner of interest payments...

 

At its most basic level, I would STILL be treating it like the AXP charge products are handled.  I get a statement with a balance and every month, I pay at least that and often some of the new charges just because I like my statements cutting with nice even round numbers.

 

They aren't losing money to those of us who pay in full.  They STILL get the swipe fees, which we probably often generate more of.  What they don't get are the juicy fees for late payments and the insane 1.5% or more in interest each month. 

 

Card issuers won't be in a rush to adopt FICO10 any more than lenders are to adopt Vantage of any flavor.  Most of them find the currently-utilized models serve their purposes.  And in a trying economic period of time, looking at new models for predictors of default is probably not high on their list of things to screw with...

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share




  • Member Statistics

    • Total Members
      184750
    • Most Online
      2046

    Newest Member
    varuth
    Joined
×
×
  • Create New...

Important Information

Guidelines