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     | Tuesday, January 11, 2000 - 11:14 pm  Everybody knows that credit scoring is used for mortgages, credit cards, car loans, and other extensions of credit. Most visitors to this forum are aware that credit scoring is also used for a variety of non credit transactions, such as employment, insurance, apartment rental, utilities, phone, cable, new checking accounts, writing checks and using debit cards at retail establishments, etc. Should the use of credit scoring be limited in some way or should its use be applied to any circumstance in which a statistical correlation can be established? What do you think? Should there be separate, higher priced retail and grocery stores for people with low credit scores if statistics could show that there is a greater percentage of shoplifters among low scorers? Should there be separate, overpriced restaurants for people with low credit scores if statistics could show that a greater percentage of people who "dine and dash" have low scores? Should there be separate movie theatres and dance clubs for low scorers if statistics could show that a greater percentage of thieves have low credit scores? (Thus, the risk that a low scorer would steal purses and wallets when the owners are distracted would presumably be greater). Should there be separate drinking fountains for low scorers if statistics could show that a greater percentage of them contract communicable diseases in any given year?... How far is too far? How far will it go before people stand up and say "Enough is enough!"
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| | Wednesday, January 12, 2000 - 07:48 am I think businesses have the right to institute whatever policies they choose and the obligation to disclose that policy to consumers not only when the consumer first begins to deal with the business, but also as the policy changes. I also think consumers have the right to not deal with businesses whose policies they find objectionable. If a movie theatre wants to pull a credit score on you before deciding if you will be permitted to attend movies there because of an emperically derived model that predicts the statistical likelihood that you will use your single admission to see multiple movies, that's fine by me. However, I would be unlikely to attend that theatre.
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| | Wednesday, January 12, 2000 - 09:26 am Barbara- I can see it now... "Can't get into that exclusive restaurant or theater because of a LOW Credit Score?" Send me $19.99 and I'll send you my informative booklet showing YOU how to raise your score! Don't be embarrassed again! Get better friends! Impress your boss!! ACT NOW!!! ***BTW, when the public gets full access to their scores I believe the scoring models will become meaningless as people quickly learn how to manipulate them. We'll have to return to fully manual underwriting. All those loan officers better brush up on their math skills! I remember 25 years ago when I bought my first car on credit... I actually had an appointment and *talked* to a loan officer. Weird!!
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| | Wednesday, January 12, 2000 - 10:06 am Yup, extremely weird. Somebody with a brain actually had to use it.
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| | Wednesday, January 12, 2000 - 12:30 pm We need to do something to stop the credit reporting agencies from the unfair practice of using computer scoring systems to disqualify applicants. The scoring systems are set up such that a person who runs a small business can not possibly obtain a decent score thereby forcing us to seek alternative financing when purchasing vehicles, doing without certain forms of credit that are readily available to large businesses and individuals who are employees rather than business owners, and generally handicapping our financial capabilities in our business and personal lives. The reason this occurs is that the computer scoring formulas are based on the assumption that everyone is an employee and not a business owner. Therefore, when there are more than the usual number of inquiries into ones credit history(true for nearly all small business owners) and/or the business has credit activity that would not be sustainable with only ones personal salary, the resulting credit score is low regardless of payment histories and without regard for the inequity of the system. I recently went to purchase a truck and GMAC quoted me a 13.5% interest rate based on my Equifax credit score. Reviewing my Equifax credit report, there is not one single slow or non payment and all of my accounts are in good standing. The entire reason for the low score was the higher than usual number of inquiries and the ratio of my personal income to my businesses credit activity as determined by a completely automated process. The computer calculates the score and GMAC (as well as many other businesses) simply uses this number to decide on ones creditworthiness.
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| | Wednesday, January 12, 2000 - 03:35 pm I experienced the same problem when I had my business. As much as I appreciate the efforts of the consumers who try to change credit reporting and scoring, I seriously doubt we'll ever see anything other than very minor changes to make us feel like we actually have accomplished something. I've been dealing with incorrect credit reporting for 15+ years now. It is the number one complaint with the FTC, year after year, and what do we get? Credit SCORING!!! The fact is that the majority of American voters lives quite comfortably, and 99.99% of those voters couldn't care less about your problem until THEY get turned down. And once they eventually get their loan or accept the fact that they can't get the loan, they get back to watching TV and accumulating more money for themselves. I sat here for a few minutes, trying to think of people who actually DO something. There's Barbara, Denise, and Dave Vest from VCR.org. Who am I forgetting?
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| | Thursday, January 13, 2000 - 04:21 am So, what can I do? I sent a longer version of my above letter to everybody I can think of who has any power and I am looking to begin or join a class action law suit on behalf of small business people. So I guess you forgot me. I may very well be naive but it seems to me that if lawyers can get huge judgements against tobacco companies, the breast implant people, and all sorts of other things with class action suits there ought to be some capable attorney or firm who would be willing to take this on. I believe that if the suit was started and publicized, a huge number of people would join it. Am I missing something?
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| | Thursday, January 13, 2000 - 06:05 am Daniel: Have you contacted your congressional representative or Congressman Cannon's office? See http://creditscoring.com for information about a bill that doesn't elminate scoring, but shines light on it (the mere discussion of it would raise your question of elimination of the practice): Fair Credit Full Disclosure Act (introduced 09/14/99)- H.R.2856 SPONSOR: Rep Chris Cannon. A bill to amend the Fair Credit Reporting Act to require the disclosure of all information in a consumer's file, including credit scores, risk scores, and any other predictors.
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| | Thursday, January 13, 2000 - 06:35 am Statistics are against you. Nine out of ten small businesses fail within the first 5 years. Of those that succeed 9 out of 10 of those fail in the next 5 years. In other words statistics indicate that your business and you are likely to not be financially viable in a short period of time -- shorter than a 60-month vehicle loan, that's for sure. It's tough to be high risk, but I wish you luck.
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| | Thursday, January 13, 2000 - 10:03 am Sean, you assume that mine is a new venture; it is not. The firm has been in business since 1992 and is very financially sound. In fact, interestingly, our overall D & B score is very, very good and our D & B paydex score, which messures how timely one pays their bills, is perfect. Even so, and this is the problem, nearly all companies that a small firm does business with want to at least look at the owner's personal credit history (inquiries) and many require a personal guarantee. Additionally, the credit reporting firms nearly always consider my company credit activity as part of any personal profile. Hence, with a $70,000.00 a year salary and an $8,000.00 monthly credit card bill (even though paid in full every month)and all or the other company's obligations gets me a low credit score. This is the problem. Your statistics are probably correct and the above is one reason why but that is not the issue here.
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| | Thursday, January 13, 2000 - 10:30 am I'm sure your D & B score is flawless, but the fact remains that your company is less than ten years old. But when you say "Your statistics [are correct]...but that is not the issue..." you err. That is the very crux of the issue! There is a statistically higher risk of default for people in your situation and, as unfair as it may seem, you are saddled with the responsibility for paying the cost of this higher risk. It's the same as the situation of someone who complained about his insurance rates going up because of a ticket he got. The ticket was for driving in the carpool lane without a passenger in his vehicle. "Honestly," she said to me, "does anyone really think my driving in the carpool lane without a passenger was somehow unsafe or increased my likelihood of having an accident?" That's completely irrelevant. She has another point on her record and that results in a higher insurance rate. If there is anyone you should be upset with it is the lenders for requiring your personal guarantee (and a credit check) when your D&B score is so high. P.S. Have you considered factoring your accounts receivable? That would let you borrow substantial sums without a personal guarantee and/or extensive credit checks.
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| | Thursday, January 13, 2000 - 10:31 am I hate it when I make a post and discover an error afterwards and I can't figure out how to fix it. Is there any way? Let me know.
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| | Thursday, January 13, 2000 - 10:48 am The way the credit scoring system is set up, it would make no difference whatever whether I was worth $50 million or teetering on the brink of bancruptcy. So, I disagree with you. Scoring is not a measure of risk. If I apply for a loan and someone who works for ABC company applies for a loan and we both have the same personal payment record, they would get a much better score. Even though they could be fired tomorrow and loose everything and I own a company with substantial assets.
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| | Thursday, January 13, 2000 - 10:51 am PS: Factoring companies conduct extensive credit checks. I used to do that in the early stages of the firm.
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| | Thursday, January 13, 2000 - 11:30 am Information on your net worth isn't included in your credit profile. How do you propose they go about calculating a score that includes this information when it's not available? Do you think most consumers have the ability to generate an balance sheet accurately showing their net worth? How would this information get on a consumer's credit profile? Does your business offer a discount? What are your standard payment terms?
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| | Thursday, January 13, 2000 - 12:03 pm And you have now arrived at exactly my point. Which is that person A who has three credit cards, a car loan, and a mortgage and is employed by a large company has a better score than person B who has the exact same credit cards, car loan, mortgage and payment history but owns their own business regardless of their actual ability to pay. None of this has anything to do with my needing to raise capital. My cash flow is just fine, thank you. It would be more convenient, and less costly, however, if I could qualify for GMAC's special 5.9% interest rate when it is offered.
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| | Thursday, January 13, 2000 - 12:11 pm Have your business give you a loan at 5.9 percent interest and buy the car, if you're that nice of a risk I'm sure the business won't mind.
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| | Thursday, January 13, 2000 - 12:28 pm You're hopeless. If the scoring system were not unfair, I could put my business's $30,000.00 to use earning a lot more than 5.9% and use GMAC's money at 5.9% just like the guy who works for somebody else. As I have said, none of this has anything to do with helping me figure out how to buy the vehicle. I bought it last week, that is a done deal. The point is that there is a built in bias against me in the credit scoring system that is peculiar to my owning a business and has nothing to do with my ability or inability to pay.
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| | Thursday, January 13, 2000 - 01:13 pm Perhaps you're in the wrong business. If business owners are a better risk than GMAC is willing to give them credit for being and you have the capacity to sort out the wheat from the chaff and know who to give loans to and who not, then you belong in the vehicle financing business. I feel confident someone with these skills could put GMAC entirely out of business in 5 years. Additionally you'd have a great advantage as a lender in that you can create the money you loan out literally out of thin air -- in essence a loan at whatever rate inflation is currently running at.
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| | Thursday, January 13, 2000 - 02:04 pm Man, you must have some axe to grind on all of this. I did not say that business owners as a group are a better risk than non-business owners. I'm not sure I understand your suggestion that I am able to create money or make loans at the inflation rate. I simply point out, and I think it should be abundantly clear, that a system that takes a guy who can walk into his bank and get an unsecured signature loan of $100,000.00 at prime plus 2% and makes him look like a poor credit risk requiring a 13.5% rate on a car loan is obviously flawed.
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| | Thursday, January 13, 2000 - 02:20 pm I have no axe to grind. If you can walk into a bank and get an unsecured signature loan of $100,000 that's great. Use that signature loan to buy yourself your vehicle instead of using GMAC. What's the problem? Not everyone uses a scoring system and not everyone uses the same scoring system. I find it frustrating that I can easy obtain credit at good terms from people who check my Quest or Beacon score, but can't get credit at good terms from people who check my Emperica or Experian-FICO scores. Considering that I've never been late on anything in over 7 years it's doubly frustrating. Am I here to blame credit scoring? Not at all. I naturally frequent the businesses that give me good terms and I avoid the ones that give me bad terms. Maybe GMAC didn't give you a good rate. Maybe if they'd pulled your credit from a different repository they would've given you 5.9 percent. No one lender is going to make everyone happy and if, by chance, any one lender does succeed in making 90 percent of those using credit happy our wonderful justice department will sue them for anti-trust violations and break them up. That's the American way. God bless America.
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| | Thursday, January 13, 2000 - 03:01 pm Yeah, this Credit Scoring Fraud IS the American way. Just like the color of people on death row is the American way. It's all based on perceptions and averages. And the poor people always lose. It truly sucks. What makes it worse is that America IS the world's leader in just about every respect. There is no place to go. Could somebody suggest a better planet? What are my choices?
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| | Friday, January 14, 2000 - 07:12 am Anti trust violations might just be a good way to go after the credit folks!
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| | Monday, January 17, 2000 - 04:45 am Mr. Brown: You said: Reviewing my Equifax credit report, there is not one single slow or non payment and all of my accounts are in good standing. The entire reason for the low score was the higher than usual number of inquiries and the ratio of my personal income to my businesses credit activity as determined by a completely automated process. But in another thread (Credit: When should this be removed from my credit report? January 12, 2000 - 6:45 pm) you said: The IRS issued a judgement against me and filed the judgement in two different counties in different states. The judgement was later released and releases were filed in both places. Since the two counties each issued a public record file number, and since of course they are different numbers, all efforts to convince the credit reporting agencies that listing both files is a duplication have failed. Consequently everyone who reviews my report concludes that there were two IRS judgements files against me when there was actually one. Is there any way in the world to correct this? We know that "Serious delinquency, derogatory public record or collection filed" is a reason a score could be lowered, so it would appear that just "inquiries" doesn't tell the whole story. Credit scores come with four reasons the score is not higher. What are yours?
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| | Monday, January 17, 2000 - 10:33 am It occured to me later that evening that someone would see that and conclude, as you have, that I am not being totally honest. Truth is, someone else was asking the other question on my computer and I told her to use my name since it is under my email address. The two problems should be considered independently as they are two individuals.
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| | Monday, January 17, 2000 - 11:18 am Credit scores come with four reasons the score is not higher. What are yours?
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| | Monday, January 17, 2000 - 12:07 pm I actually do not know the answer to your question other than that I discussed the matter with the finance person at a car dealership. I was not turned down by anyone for a loan, I was simply quoted a higher than acceptable interest rate and was told that the reason was due to my score. I reviewed my reports in her office but did not get a copy of them and am currently awaiting copies I have ordered. So far, I have only received one and it gives no score or indication that anything is amiss.
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| | Monday, January 17, 2000 - 12:28 pm My personal report does list some real estate loans but does not say that they are real estate loans due to one of them having an 18 month term (development under construction) and one being a construction loan. My personal report also lists an unsecured credit line that belongs to my business under my personal report. Also, there are about 30 inquiries in the last 24 months. So, the loan officer told me that I scored poorly (for me)due to number of inquiries and due to having more debt listed in the report than my personal income would sustain. Anyway, thats where I'm at. I am new to all of this scoring business although I guess I just never had any rreason to pay attention before.
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| | Tuesday, January 18, 2000 - 05:59 am Car dealers are not know to be detail-oriented and, like many in sales, rather than muddle in the mire of complex credit reports and clutter their desk with a problem that makes them no money, they would rather throw you a bone like "oh, you just have too many inquiries" and shoo you out the door with the higher rate. You have no legal right to the score. Find somebody who will let you see your report, let you have a copy of it, and show you the score and the four underlying reasons (given by the credit bureau) the score is not higher. See http://creditscoring.com. It discusses this very issue.
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| | Tuesday, January 18, 2000 - 09:26 am See, this makes no sense to me. If a person has "too much debt" for their income and you give them a higher rate, won't that increase the amount of their payments? I mean, if they can't afford to make the payments at 5.3% interest then how will they fare at 12% interest -- better or worse?
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| | Tuesday, January 18, 2000 - 05:38 pm YUP! You got it, Sean. The rate is higher, the payments are higher, a percentage of borrowers is EXPECTED to default. The losses are absorbed by the profits from the people who pay, and especially by the people who pay late.
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| | Thursday, January 20, 2000 - 02:50 am Kinda like if/when you bounce a check at the bank. The institution charges you MORE of what you didn't have in the FIRST place. Crazy world we live in ... :)
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| | Wednesday, January 26, 2000 - 07:54 am Consider this. 15-20 years ago, people in general were not very sophistocated about credit. The credit bureau's pretty much had they way. Then in the early to mid 80's, credit repair clinics begin to sprout up, some good, some not so good. But by the late 80's, people began to "take charge" of their credit, disputing issues, and (overall), taking more control of their credit reports (including "beating the system" by getting legitimite negative entries removed). So the bureaus, working with Fair Issacs, came up with a strategy - develop a numeric code and not tell people how the code is computed. It is, essentially, now the same situation as it was 20 years ago. People have a "rating" (i.e. a score), and are pretty much forced to just accept it. If people are eventually successful in "cracking the secret about the score", then the bureaus will simply develop another "secret" method. We can't win.
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| | Wednesday, January 26, 2000 - 02:20 pm 15 to 20 years ago Credit Scoring did not exist. Today, in the year 2000, the majority of Americans don't have a clue. Just because YOU are on the net and reading this site or the Wall Street Journal, don't conclude that everybody else is on the net looking for credit scoring info and reading the Wall Street Journal. There was more "Equal Opportunity" in America in the 1800s than there is today.
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| | Thursday, January 27, 2000 - 03:11 am Anonymous on Wednesday, January 26, 2000 - 12:54 pm: You said, "It is, essentially, now the same situation as it was 20 years ago. People have a "rating" (i.e. a score), and are pretty much forced to just accept it. " Tell us about the "rating" system 20 years ago. Was an individual's rating a number?
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| | Thursday, January 27, 2000 - 05:59 am Anonymous never said that we had a "rating system" twenty years ago. He/she said that we were SCREWED twenty years ago because we knew NOTHING about credit reporting until the 80's. Then they came up with scoring and now we're SCREWED today because we are "... in the same situation ..." that we were 15-20 years ago by not knowing about credit scoring, even though it's not our fault (because they hide the methodology and basis for scoring from us). And even if we ever crack the scoring issue, they'll come up with something else.
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