21 ms·

> credit score pretty accurately reflect what they are supposed to measure - credit worthiness Do they? If that was true, how could we verify it, beyond an in

by epgui 4y ago

> credit score pretty accurately reflect what they are supposed to measure - credit worthiness Do they? If that was true, how could we verify it, beyond an initial gut feeling? There is no published rule book or methodology for credit score calculations!

xyzelement 4y ago
I get what you are saying but you are not the customer. The customers are lenders which rely on these scores to make lending decisions critical to their business. Presumably these lenders find these scores accurate enough to prevent enough bad loans while not turning away too many credit worthy customers. That said, obviously the models can be improved with more data. I worked for a lender for a while whose edge was giving people a slightly lower rate (or lending to some folks that just missed the cutoff with other lenders) because we thought our model was a bit more accurate than the credit scores / models used by other lenders. But even we admitted to ourselves that these were just marginal improvements, by and large the credit score is a super meaningful indicator.
- epgui 4y ago
  > Presumably these lenders find these scores accurate enough to prevent enough bad loans while not turning away too many credit worthy customers. And this is precisely the point. If there was an error in your score, you'd have no way of knowing, no reasonable basis for any appeal, and it just sucks to be you. Lenders don't care if individual scores are accurate, they only care about whether they're making more money than they're losing. It's analogous to doing AI gender prediction: it works fine in the aggregate, but you run into issues at the individual level, and it's the individual's rights that I care about.
  - xyzelement 4y ago
    // If there was an error in your score, you'd have no way of knowin I don't think that's true. I remember many years ago getting a free credit report on myself (it may have been a free trial from a monitoring service but I believe you can also just get it from the agencies itself) You get to see the data that is factored into your score. Anything that majorly dings your credit should be obvious (eg Experian thinks you are delinquent on something that is actually paid off) I never had to deal with that but likely the error then is with the reporting bank so you call them to fix the issue. Is there a reason you think this isn't possible?
    - epgui 4y ago
      You can know in the most obvious subset of cases of error, but if your score is 573 and it's supposed to be 605, good luck figuring that out. > Is there a reason you think this isn't possible? The methodology for the calculation of credit scores is secret. You can't go on the internet and figure out how they do it. They don't tell you, they don't publish it, you can't know. Therefore you don't have the ability to check their work.
      - xyzelement 4y ago
        I understand what you're saying, I just think it's mainly a contrived scenario. Minute differences in the score (573 vs 605) don't really impact you and there's nobody trying to replicate the calculation to make sure they get whatever it's "supposed to be" - whatever that means. The more likely scenario where someone is going to troubleshoot is "I paid off all my debts and have a lot of unused credit, how come my score is too low for mortgage lenders to talk to me" - and likely a gross mismatch like that is going to be obvious. They give you a pretty meaningful guide on what to look for in determining your score [0] that should be enough. Note, I am not arguing that I think it's good the exact formula is not known, I just think it's not a real problem for either the lenders (who are the ones who actually base their business on this data) or the consumer. [0] https://www.myfico.com/credit-education/whats-in-your-credit-score https://www.myfico.com/credit-education/whats-in-your-credit...
        epgui 4y ago
        > Minute differences in the score (573 vs 605) don't really impact you Don't they, though? How do you know? For a person who gets refused access to some important service or product because they're just 1 point under some arbitrary and unknown threshold, yes there's an impact.
        refurb 4y ago
        No, they don’t make a difference. Generally credit scores falls in wide bands that give a general credit risk. 573 vs 605 are both very high risk and you’re getting slammed regardless. The scores are no more arbitrary than the requirement that bankruptcies roll off your score after 7 years. It’s not 6 years, or 6 years and 364 days, it’s 7 years and yes being on either side has a massive impact.
- tarranoth 4y ago
  As far as I understand (not a US citizen), the biggest thing people seem to do is: -get a credit card -do your normal shopping with it But this just seems nonsensical to me, sure if you can't pay your shopping cart, a mortgage is very likely a bad idea. But what predictive value is there in this score besides that? For individuals it seems more useful to just ask payslip info instead of some weird arbitrary number to get the feeling if someone can pay you.

by epgui 4y ago

xyzelement 4y ago

I get what you are saying but you are not the customer. The customers are lenders which rely on these scores to make lending decisions critical to their business. Presumably these lenders find these scores accurate enough to prevent enough bad loans while not turning away too many credit worthy customers. That said, obviously the models can be improved with more data. I worked for a lender for a while whose edge was giving people a slightly lower rate (or lending to some folks that just missed the cutoff with other lenders) because we thought our model was a bit more accurate than the credit scores / models used by other lenders. But even we admitted to ourselves that these were just marginal improvements, by and large the credit score is a super meaningful indicator.

epgui 4y ago
> Presumably these lenders find these scores accurate enough to prevent enough bad loans while not turning away too many credit worthy customers. And this is precisely the point. If there was an error in your score, you'd have no way of knowing, no reasonable basis for any appeal, and it just sucks to be you. Lenders don't care if individual scores are accurate, they only care about whether they're making more money than they're losing. It's analogous to doing AI gender prediction: it works fine in the aggregate, but you run into issues at the individual level, and it's the individual's rights that I care about.
- xyzelement 4y ago
  // If there was an error in your score, you'd have no way of knowin I don't think that's true. I remember many years ago getting a free credit report on myself (it may have been a free trial from a monitoring service but I believe you can also just get it from the agencies itself) You get to see the data that is factored into your score. Anything that majorly dings your credit should be obvious (eg Experian thinks you are delinquent on something that is actually paid off) I never had to deal with that but likely the error then is with the reporting bank so you call them to fix the issue. Is there a reason you think this isn't possible?
  - epgui 4y ago
    You can know in the most obvious subset of cases of error, but if your score is 573 and it's supposed to be 605, good luck figuring that out. > Is there a reason you think this isn't possible? The methodology for the calculation of credit scores is secret. You can't go on the internet and figure out how they do it. They don't tell you, they don't publish it, you can't know. Therefore you don't have the ability to check their work.
    - xyzelement 4y ago
      I understand what you're saying, I just think it's mainly a contrived scenario. Minute differences in the score (573 vs 605) don't really impact you and there's nobody trying to replicate the calculation to make sure they get whatever it's "supposed to be" - whatever that means. The more likely scenario where someone is going to troubleshoot is "I paid off all my debts and have a lot of unused credit, how come my score is too low for mortgage lenders to talk to me" - and likely a gross mismatch like that is going to be obvious. They give you a pretty meaningful guide on what to look for in determining your score [0] that should be enough. Note, I am not arguing that I think it's good the exact formula is not known, I just think it's not a real problem for either the lenders (who are the ones who actually base their business on this data) or the consumer. [0] https://www.myfico.com/credit-education/whats-in-your-credit-score https://www.myfico.com/credit-education/whats-in-your-credit...
      - epgui 4y ago
        > Minute differences in the score (573 vs 605) don't really impact you Don't they, though? How do you know? For a person who gets refused access to some important service or product because they're just 1 point under some arbitrary and unknown threshold, yes there's an impact.
        refurb 4y ago
        No, they don’t make a difference. Generally credit scores falls in wide bands that give a general credit risk. 573 vs 605 are both very high risk and you’re getting slammed regardless. The scores are no more arbitrary than the requirement that bankruptcies roll off your score after 7 years. It’s not 6 years, or 6 years and 364 days, it’s 7 years and yes being on either side has a massive impact.
tarranoth 4y ago
As far as I understand (not a US citizen), the biggest thing people seem to do is: -get a credit card -do your normal shopping with it But this just seems nonsensical to me, sure if you can't pay your shopping cart, a mortgage is very likely a bad idea. But what predictive value is there in this score besides that? For individuals it seems more useful to just ask payslip info instead of some weird arbitrary number to get the feeling if someone can pay you.