Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

FICO and the Credit Bureau Cartel

thebignewsletter.com

Post reply on HN
Print view View original

41–50 of 136 posts

Re: FICO and the Credit Bureau Cartel

#41

Post by matwood »

alistairSH wrote: post #28
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 li…

Mine swings monthly for the same reason, though not as much. The report I get tells me why it swings ('used credit balance').

Re: FICO and the Credit Bureau Cartel

#42

Post by nytesky »

rufus_foreman wrote: post #29
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, de…

If all these loans are “guaranteed” by FM, ie US govt, why even have all these middle men taking a cut — why not do mortgages like Direct Loans from the govt?

Re: FICO and the Credit Bureau Cartel

#43

Post by WaitWaitWha »

> Even if a lender thinks the customer would be a good risk, the lender has to buy a FICO score regardless.

This isn't completely correct. For a period I had no FICO score, yet I was able to secure a loan from a Credit Union. It did require me to show my assets and income flow, but the Credit Union was able to provide me with a loan.

The score from what I have gathered when I learn really rewards those who remain in debt and pay substantial interest, not the frugal and financially stable (check to check is not financially stable). Basically encouraging to keep self in debt just at the edge of financial disaster's precipice.

> ... FICO prohibits not only validating different models against FICO scores, but even displaying FICO scores next to non-FICO scores. ...

> ... all three bureaus plus FICO have massive pricing power.

> ... come to a set of arrangements to jointly hike prices

This cartel will never be broken up. Too much money goes into the politicians pockets to move for break-up.

Re: FICO and the Credit Bureau Cartel

#44

Post by ensignavenger »

There is an interesting dynamic here, one government agency, the FHFA, dictates that mortgage brokers have to use FICO and all three major credit bureaus, explicitly granting these companies a government enforced monopoly. Another government agency with different goals, the CFPB, comes in and complains about the price these government granted monopolies are charging and proposes regulation to limit it.

These dueling agencies may eventually find a balance, with the FHFA dictating which companies services have to be used and the CFPB dictating how much those services can charge...

The whole thing is a failure not of free markets but of different government regulators not coordinating their regulations.

Re: FICO and the Credit Bureau Cartel

#45

Post by lenerdenator »

chollida1 wrote: post #32
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. I wouldn't cut out Title insurance, I have two friends for whom it saved low 7 digits each due to fraud in one case and liens in another. It's incredibly important in today's market and I can't see how you can call it a scam, unless you also view car/health/life insurance as a scam as well, in which case we just disagree:)

> health insurance

The way it's implemented in the US, it absolutely is.

Re: FICO and the Credit Bureau Cartel

#46

Post by matwood »

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…

It's not about having/not having money, it's about propensity to pay. Obviously, people need money to pay, but someone can have all the money in the world and still default on loans by not paying.

Re: FICO and the Credit Bureau Cartel

#47

Post by lenerdenator »

miki123211 wrote: post #35

If you think this is a "capitalists being evil" problem and not an "regulators over-regulating" problem, you should pay particular attention to fragments of the article: > It’s not that hard to come up with a model for underwriting that is reasonably accurate; any bank with scale could probably do it. But FICO uses trade secrets, copyright, patents, or restrictive contracts to block anyone from doing so. > First, the…

The capitalists regularly lobby government to destroy their competition and make holes in regulations that would cause major disruptions to their business models. The light truck exemption to CAFE rules is a great example.

Re: FICO and the Credit Bureau Cartel

#48

Post by bux93 »

Dalewyn wrote: post #6
ykonstant wrote: post #5

Earlier quoted context omitted.

More than half of the above don't imply that you don't have money. Lack of money is only one of the possible reasons for those situations. * an inquiry means you're asking for a loan, implying you don't have money Entities with tons of money seek loans all the time for liquidity and risk mitigation. * you're taking and maxing out lines of credit, implying you don't have money Nope, lack of understanding how CC scorin…

>Lack of money is only one of the possible reasons for those situations. As far as a lender is concerned, if you don't pay back your debts you might as well not have money even if you actually do. >Entities with tons of money seek loans all the time for liquidity and risk mitigation. And each and every one of those inquiries will lower your credit score, because you're taking on more debt. Do you have money? Will you…

Inquiries impact your credit score negatively not because you took on more credit, but because you (most likely) didn't.

The correlation is that if you get rejected by lender A, and try a new application at lender B, and again at lender C, you will have a lot more inquiries than some-one who got credit extended at the first try. FICO don't know if you actually got rejected, or if you were just checking rates, nor do they know what the reason for rejecting you was (maybe they don't even serve your area but their funnel doesn't filter on that early enough) - they just know you were checked.

This particular one is a bit iffy, my bank's UI essentially tricked me into a credit check. Then again, all of them are quite iffy and based on a few datapoints that FICO has access to, which omits many of the things you'd look at during any kind of manual underwriting.

Re: FICO and the Credit Bureau Cartel

#49

Post by sidewndr46 »

e63f67dd-065b wrote: post #27
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.

My experience was that rental companies do the same thing for a lease. I paid for one more than once when leasing a house

Re: FICO and the Credit Bureau Cartel

#50

Post by splwjs »

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…

Last time I looked at the amortization schedule for a 30 year fixed mortgage the payback was about 250% of the loan amount.

No other figures are consequential. Mortgages are a predatory thing pointed at the financially illiterate and the hopeless right now.

Post reply on HN