credit scores

[Haggisman]

Yep. The thread is laughable.

Basically MSE or someone has highlighted that the CRA scores aren't exactly the same as what every financial company uses and somehow the internet has used that to mean they are useless and it keeps getting peddled on internet forums.

Barclays will for example know that X types of people with X1 and X2 credit histories end up defaulting Y1 and Y2 amounts. They can attempt to build a model of that for the many permutations.

The CRAs can do this for all companies. They have that exact same information from Barclays, but also HSBC, Natwest etc. They all upload that information to the CRA databases!

What these people will be surprised to hear is that the CRAs actually produce the best credit scores as they have the most information. Companies, know this and so don't inherently dismiss the CRA scores.

Smaller companies or companies that don't wish to invest heavily in analytics will in fact use these off the shelf scores.

The issue arises in that not all financial companies are looking for exactly the same things, and so any one size fits all score doesn't work. Certain factors may be weighted differently according to the needs of the company. Companies also have other information available to them that they don't necessarily reveal to CRAs (or CRAs aren't allowed to reveal to other companies).

This is where additional information can help and they have analytics teams to decide what is best for the company. Will it be massively different to the CRA scores? It will actually be very strongly correlated.

So why does the OP (and me) have vastly differing scores with the different Credit Agencies then? Given the exact same information, then surely a "good" score with one would mean a "good" score with all of them, rather than a "good" score with Experian and a "poor" score with Noddle?

 

[PMKeates]

Most banks will lend generously to people who are starting out with limited credit history if they have other ticks in the boxes - time at address, good postcode etc. That's not unusual and many young people without history go on to be fine borrowers.

There are practical issues with having some kind of universal standard and forcing companies to adopt a position on it. The system today works well with people of all backgrounds and histories having access to credit.

So why does the OP (and me) have vastly differing scores with the different Credit Agencies then? Given the exact same information, then surely a "good" score with one would mean a "good" score with all of them, rather than a "good" score with Experian and a "poor" score with Noddle?

Many reasons... just two: 1) They have different scoring criteria, 2) They have different information. It's not a mental challenge to conclude that Noddle may have some information that isn't positive. If they don't, then who cares?

 

[Haggisman]

Many reasons... just two: 1) They have different scoring criteria,

Doesn't that just back up the argument that the score is essentially useless on it's own?

Unless you know that the lender has the same criteria as the credit agency, then the score the agency give you bears no real relation to the "score" the lender gives you.

What's far more useful (IMO) are the soft searches/eligibility checks that have started appearing for loans & credit cards recently; at least they are based on the lender's criteria.

 

[Aldav]

Let me be clear. No major organisation will seek your score and make a decision off the back of that. ALL significant lenders providing credit will reference 1 maybe 2 agencies for a broader perspective on your lending habits. So if you go to a lender who uses Experian for example and you can easily find out which lenders use which agencies, knowing where you sit is useful as a really bad score or worse, wrong information can impact the decision. It will not be the basis of a decision, but it WILL form part of your risk profile.

I made a point in a previous thread about owning your credit score. This was not about worrying to much about what it was, but more about ensuring the data is accurate. I had massive problems with my Bank previously because of duff information held by them and 1 credit agency relating to my electoral register position and houses owned. So to my point, it does not mean bugger all, it has an impact.

Exactly.

Credit "scores" are all but useless, because companies extending credit use their own criteria. The sole use of credit scores is for attentive users to more easily spot issues, or red flags, on their record, and either take steps to amend behaviour causing it, or to spot errors so you can dispute, correct or add explanations, depending on the issue.

What you can't reliably do is predict how any given lender will react to a given dataset, because they carefully don't make their criteria public.

 

[PMKeates]

Doesn't that just back up the argument that the score is essentially useless on it's own?

Unless you know that the lender has the same criteria as the credit agency, then the score the agency give you bears no real relation to the "score" the lender gives you.

What's far more useful (IMO) are the soft searches/eligibility checks that have started appearing for loans & credit cards recently; at least they are based on the lender's criteria.

Not at all. The score is useful unless you'd like to review your entire credit file with your personal understanding of lending criteria, which for most people will be very limited.

Exactly.

Credit "scores" are all but useless, because companies extending credit use their own criteria. The sole use of credit scores is for attentive users to more easily spot issues, or red flags, on their record, and either take steps to amend behaviour causing it, or to spot errors so you can dispute, correct or add explanations, depending on the issue.

What you can't reliably do is predict how any given lender will react to a given dataset, because they carefully don't make their criteria public.

I'd say summarising an entire credit file based on typical lending criteria in to a single number is quite useful. From a quick review of my file I can see thousands of data points and I'd rather not have to review all of those manually if every agency gives me a top score and I get access to the credit I want.

 

[muon]

So why does the OP (and me) have vastly differing scores with the different Credit Agencies then? Given the exact same information, then surely a "good" score with one would mean a "good" score with all of them, rather than a "good" score with Experian and a "poor" score with Noddle?

They don't necessarily have the exact same information although they will have a large overlap.

Even with lots of data you can end up with very correlated but different scores in a proportion of cases. It depends on your approach to building scores and judgement comes into play.

Secondly a good score range and bad score range is different between Experian and Callcredit.

I have actually seen a comparison of Callcredit and Experian scores across a sample size of hundreds of thousands. They are very strongly correlated. It should say something that two independent score providers end up with a very similar scoring algorithm.

 

[Aldav]

I'd say summarising an entire credit file based on typical lending criteria in to a single number is quite useful. From a quick review of my file I can see thousands of data points and I'd rather not have to review all of those manually if every agency gives me a top score and I get access to the credit I want.

Which is why I said "all but useless", not completely useless. Monitoring that score, over time, gives you an alert if it changes. Monitoring several different scores against their individual pasts tells you a bit more. But none of those scores tell you much about how a given lender will see a given application, because not only do different agencies have different methodologies, but individual lenders have both different methodologies and different criteria, and often, other sources of information too.

But if you do detect warning signs, it's a bit more effort to work out why, and correct it.

In the end, lenders use credit data to inform their decision-making process, not to delegate it.

 

[Tephnos]

I too, got denied for Paypal credit.