Credit score system, unfair and way too strict (paying, accounts, increase)

[beenhereandthere]

Originally Posted by desertsun41

The credit scoring system is a scam. It was originally developed by Fair Isiac to assist lenders in making decisions on extending credit. Today it is relied on 100% with no leeway meaning so many loan applications are approved or denied without a human ever looking at it. The stupid FICO computer makes almost all decisions.

Quite some time ago I seem to recall a president, so I must not be talking about bushy, that got a new law into affect where it would be illegal for a creditor to deny credit based on a medical debt. Now we all now that is blatantly ignored. I wish we could get some teeth into this little known law.

There are so many people with perfect credit except for a medical emergency they got into with no insurance and of course was unable to pay the $100,000 per day they spent in the hospital. So their credit is forever ruined by no fault of their own.

This stinks!

Well put, you are one who gets it

[70Ford]

Originally Posted by Humanoid

its usually because bad life planning... why do you expect a company to pay for your mistakes?

Darn those non life-planning people.

[beenhereandthere]

Originally Posted by KevK

I do not have a problem with the scoring system. It is fair and many companies use it to precisely REMOVE the human factor from it and further distance themselves from charges of discrimination among applicants. It is very simple- you have XXX score, you get YYY terms. I would go even further and require lenders to post their rates for each score publicly so that consumers could comparison shop for credit the way we do cars.

How does that further remove themselves from charges of discrimination? It seems to me it may do the opposite. Sometimes though injustice (even though more often not) minorities tend to collectively have lower scores.
Or maybe you mean by removing themselves from discrimination, that all who have a score of say 550, would be denied, where a human may look at a, example, white guy, approve him with a 550 score and turn down the latino with the same score.

[Briolat21]

Its the same type of system (statistical, actuarial) as insurance companies use when calculating the "risk" of you cashing in on a policy.

30 year old white male, no smoking, not overweight = cheap premium
63 year old white male, very obese, one previous heart attack, smokes a lot = refused coverage.

Same thing. Except your credit score range is what puts you in the "cheap premium" or "no thanks, we'll pass". There's nothing fair about it. Its not meant to be fair. Its meant to eliminate the risk to the person lending the money.

That sucks for a lot of people and I'm sorry for anyone caught in this issue through no fault of their own. But expecting business to be fair is a waste of time and energy.

[FLPL75]

this is how they break down how your score is figured
Payment history: 35 percent
Current balances: 30 percent
Length of credit history: 15 percent
new credit inquires: 10 percent
Mix of credit/other factors: 10 percent

Also if your automatically turned down by the "computer" you can ask for a underwriter review Not all lenders will do this but I have found banking institutes that you have a relationship with are more likely to do this.

[Humanoid]

The point I was making is it seems the system is set up to make more people have poor credit than it is to have it the other way around.

The system is set up to correctly determine your credit worthiness. Lets assume you are correct though, that the algorithm consistently downgrades people's credit worthiness. Are markets are for the most part free, and if this was indeed the case a new credit card company could come around and give out lower rates and still make money (because, as you suggest they are downgrading folks credit).

So their credit is forever ruined by no fault of their own.

How is not having health insurance "no fault of their own"? If you don't have health insurance you are gambling, plain and simple.

[emailvasally]

There are companies that will look at the "whole situation" a year ago I went with a friend to get a car. She had a 520 credit score. a year before that she had some medical problems that could not be paid in full. owed 50k but set up a payment plan. she brought ALL paperwork with her. 6 months before that she had an issue with indentity theft. not everything was off her credit report yet. she brought ALL paperwork with her. They originally were not going to give her a loan at all. after hours of negotians and only 2 k down she was able to get a loan at 15% for 3 yrs. yes, crap interest rate but not as bad as I have seen. But the point is they eventually looked at more than just her score. She ran into bad times and proved everything was not her fault and was being taken care of.

Life is not fair and FICO was never meant to be. I would not loan someone money with a low FICO score.

[TimtheGuy]

Originally Posted by beenhereandthere

Why? Don't say something like that and just run away.

Because it is not like there are 20% of the people in each of your 5 loosely derived catagories. Not even close as a matter of fact.

Very few people are in the 400s, so you could almost consider the minimum score 500. The average score in the US is about 670+. The average score here in MN is 707! Anything over 700 is pretty much considered excellent, so our run of the mill average Joe has excellent credit.

Here is a link to average credit scores by state: Average Credit Scores by State - Credit Score Information (http://www.creditreport.com/info/credit-scores/average-credit-scores.asp - broken link)

I work in mortgages and deal with credit reports every day. I happen to think the system works pretty darn good considering the vast amount of data. Of coarse there are some glitches, but overall the scores are a pretty good indicator of credit worthiness.

The concept is simple don't max out your debt and pay your bills on time and your credit score will be good.

[NorthmeetsSouth]

Originally Posted by desertsun41

The credit scoring system is a scam. It was originally developed by Fair Isiac to assist lenders in making decisions on extending credit. Today it is relied on 100% with no leeway meaning so many loan applications are approved or denied without a human ever looking at it. The stupid FICO computer makes almost all decisions.

Quite some time ago I seem to recall a president, so I must not be talking about bushy, that got a new law into affect where it would be illegal for a creditor to deny credit based on a medical debt. Now we all now that is blatantly ignored. I wish we could get some teeth into this little known law.

There are so many people with perfect credit except for a medical emergency they got into with no insurance and of course was unable to pay the $100,000 per day they spent in the hospital. So their credit is forever ruined by no fault of their own.

This stinks!

While I agree tht it is unfortunate that some otherwise responsible people might have their credit ruined by a medical emergency this is generally not the case.
Most people who have lousy credit scores earned them through spending more than they had and not making payments on time. Having an excellent credit score is very simple to do. Live within your means and don't borrow more than you can comfortably pay. There is no trick to it.

[neekah18]

How is not having health insurance "no fault of their own"? If you don't have health insurance you are gambling, plain and simple.[/quote]

As someone who does not have health insurance I have to jump in here. I graduated last March with a Bachelor of Science Degree in Fashion Marketing and Management. Before that I was working for a company for 3 years but had to leave in order to do an unpaid internship, hence my insurance was cancelled. I was been working temp jobs since then and unfortunately because of all the stress I ended up in the hospital for a week with an abcess in my throat. Luckily I was able to get Charity Care and everything was paid for (except one of the doctor's bill which was $225 and the whopping $400 bill I got from the ambulance company which transported me about a mile and a half from one hospital to the next). Last week I had to go to my doctor and get a quickk exam (that cost me $180 on the spot) blood work had to be done and I just got a $406 bill for that. Luckily my doctor's office is going to work it out so I pay only $203 but still all in all what part of not having insurance was my fault? Since graduating I have worked off and on doing temp work just to pay bills and catch up on bills that I had to pay late (and deal with whopping late fees and phone calls). What I am saying is not everyone who gets into debt is a worthless piece of scum and spent more than they could afford. Things get rough and you try to cover them the best way you can. I do believe credit scores are a sham. Why do all three credit reporting companies have different scores and different accounts on them??? How can my score be 542 on one and 692 on the other? When I close an account why does my score get lower? Maybe I closed it because they charged an annual fee and I want to pay off my credit card debt. Why must I pay off a card but keep it open in order for my score to increase? There are flaws in this FICO system and I think it weeds out alot of people.


And also before anyone says "why didn't you buy month to month insurance", The cost is about $150-$200+ and they don't cover everything like company insurance does. My copay would not be $20 like it would if I had insurance through my company. The copay ranges and usually it is nothing shorter than $60.