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FICO and the Credit Bureau Cartel

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Re: FICO and the Credit Bureau Cartel

#21

Post by astura »

Harmohit wrote: post #2

I wonder if open source software can play a role in this. Maybe we can have an open source algorithm for determining credit ratings and private companies only provide a secure database of ratings. It will also offer the lay person insights into how the credit rating is exactly determined. They can know what is causing their rating to be less than desired and take appropriate action, instead of watching a random youtu…

FICO already tells you what goes into their scoring algorithm. It's not a mystery.

https://www.myfico.com/credit-education/whats-in-your-credit...

Re: FICO and the Credit Bureau Cartel

#23

Post by standardUser »

astura wrote: post #21
Harmohit wrote: post #2

I wonder if open source software can play a role in this. Maybe we can have an open source algorithm for determining credit ratings and private companies only provide a secure database of ratings. It will also offer the lay person insights into how the credit rating is exactly determined. They can know what is causing their rating to be less than desired and take appropriate action, instead of watching a random youtu…

FICO already tells you what goes into their scoring algorithm. It's not a mystery. https://www.myfico.com/credit-education/whats-in-your-credit...

These agencies had far less regulation and transparency before Dodd–Frank in 2010.

Re: FICO and the Credit Bureau Cartel

#24

Post by mschuster91 »

steveBK123 wrote: post #12

I would point out that "400% increase in mortgage credit check fees" sounds probably a lot worse than the actual number - which is like.. $150 at the time you are getting a mortgage. Of all the fees associated with buying your average $400k home, I don't think the $150 credit check fee is the big pain point. Title insurance is a much bigger scam/cost. The various state & local taxes at closing are orders of magnitude…

> Title insurance is a much bigger scam/cost.

Given the horror stories that crop up regularly on HN or Reddit, these insurances actually make sense.

Re: FICO and the Credit Bureau Cartel

#25

Post by mschuster91 »

Dalewyn wrote: post #4
akira2501 wrote: post #3

Earlier quoted context omitted.

> and take appropriate action Presumably the reason they have a lower score than desired is because they already failed to do this in one form or another. > "5 ways to quickly improve your credit score". Have no inquiries. Have no forced account closures or writeoffs. Have as much total open credit as you can without triggering the first two. Have at least one secured or unsecured installment loan open and then paid…

Pretty much, yeah. A credit score is a descriptor of the risk of financial loss when lending the individual concerned some money. So the only real way to grow and keep the score high is: * Pay your credit card and loan statements when they are due (late payments imply you don't have money). * Keep credit inquiries to the minimum necessary (an inquiry means you're asking for a loan, implying you don't have money). * D…

> Keep credit inquiries to the minimum necessary (an inquiry means you're asking for a loan, implying you don't have money).

This one should be outright banned, as it's effectively anticompetitive - there are thousands of banks on the planet, and it should be anyone's right to make an inquiry at each and every single bank to make sure one gets the best rates.

Re: FICO and the Credit Bureau Cartel

#27

Post by e63f67dd-065b »

steveBK123 wrote: post #12

I would point out that "400% increase in mortgage credit check fees" sounds probably a lot worse than the actual number - which is like.. $150 at the time you are getting a mortgage. Of all the fees associated with buying your average $400k home, I don't think the $150 credit check fee is the big pain point. Title insurance is a much bigger scam/cost. The various state & local taxes at closing are orders of magnitude…

The article mentions that one in ten pulls actually convert into a mortgage, so actually each borrower is paying $1500.

Re: FICO and the Credit Bureau Cartel

#28

Post by alistairSH »

Harmohit wrote: post #2

I wonder if open source software can play a role in this. Maybe we can have an open source algorithm for determining credit ratings and private companies only provide a secure database of ratings. It will also offer the lay person insights into how the credit rating is exactly determined. They can know what is causing their rating to be less than desired and take appropriate action, instead of watching a random youtu…

Not only do banks and credit agencies provide a "recipe" for improving your score, most do so free of charge (for existing customers).

For example, I know my score swings by +/-30 points/month. I'm fairly confident that is due to the balance on my CCs varying when the score is calculated (there is nothing else about my financial situation changing - same house for a decade, same car loan for 5 years, no new credit lines/loans, etc). But, I pay the cards off every month, and the score always rebounds.

Re: FICO and the Credit Bureau Cartel

#29

Post by rufus_foreman »

asah wrote: post #10

seems like a startup opportunity - start with a well-defined subset of consumers where you can beat FICO in accuracy, then expand out. Don't compete on price, win on detail and quality.

>> seems like a startup opportunity

"In 2006, the three credit bureaus decided they were tired of FICO’s position in the industry, and created a rival, called VantageScore, offering credit ratings for much cheaper than FICO"

...

"A few years ago, the Federal Housing Finance Agency (FHFA), which runs most housing finance for the government through its control of secondary mortgage buyers Fannie Mae and Freddie Mac, decided that it might want to create some competition for FICO. So it turned to VantageScore ... Instead of allowing mortgage lenders to pick either FICO or VantageScore, FHFA simply required that lenders use both. So now, instead of having to deal with one monopoly, mortgage lenders will have to deal with two"

This is not a market problem, or a technical problem. The problem here is the US federal government.

Re: FICO and the Credit Bureau Cartel

#30

Post by morpheuskafka »

steveBK123 wrote: post #12

I would point out that "400% increase in mortgage credit check fees" sounds probably a lot worse than the actual number - which is like.. $150 at the time you are getting a mortgage. Of all the fees associated with buying your average $400k home, I don't think the $150 credit check fee is the big pain point. Title insurance is a much bigger scam/cost. The various state & local taxes at closing are orders of magnitude…

Title insurance could be safely eliminated with something called the Torrens title system, it was tried in the US but never took off outside of Guam. The issue comes from the lack of any definitive record of property ownership, raising the possibility that challenges may be raised in court in the future that weren't known to the buyer.
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