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What's a Credit Score? Really
Posted 26 April 2012 - 02:35 PM
It's not a bad summary and it helps to dispel the myth that consumers have a specific credit score.
I would add to their description of a custom score. These usually include a net bank profit aspect. That is banks will accept higher risk if it is more than offset by an increase in expected profit from adding the consumer. But only to a point. That usually means people that spend a lot or people that carry a balance but have a good history of paying even if their risk (FICO) scores are somewhat lowered by util. The latter will also consider a capacity score which measures the ability of a consumer to take on more debt.
It would be nice if consumers could access these scores but they are even more proprietary than generic or industry specific FICO scores.
Posted 26 April 2012 - 03:57 PM
Posted 26 April 2012 - 04:04 PM
I first saw credit scores being used in the early 70s back in the day when i was beginning my career in finance. Those scores were developed (i was told) by a study of those that didn't pay .
Back in the 70's credit scoring was pretty ad hoc. There were no laws regarding what was in credit reports and they included lots of crazy stuff. Mostly, scoring was done by banks with huge customer bases based on their own internal experience. It was all secret and consumers had no idea why they were declined or approved. Nor did they have access to their credit history.
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