Read on Twitter
sure, y’all want to know what credit scores actually are and how they work?
here we go: a thread
https://twitter.com/regulatorynerd/status/1299733791502602241
here we go: a thread
https://twitter.com/regulatorynerd/status/1299733791502602241
first of all, there are many credit scores - it’s sort of like talking about how physically attractive you are. there may be broad consensus but if you ask any one individual to specifically rate you, there will be differences because each cares about different things
the two most popular scoring are FICO and VantageScore. FICO is older, more reputable, and MUCH MORE EXPENSIVE to buy. Which is why you as a consumer are more likely to see VantageScore, but lenders for important things are more like to use FICO
each of those has a bunch of different versions. so when you see the news that like "FICO now incorporates rental payment data" it's only the new versions of FICO, which DOESN'T MATTER BECAUSE NO ONE USES IT. Mortgage lenders are like 10 versions behind -- too risky to update
very few lenders approve you or set interest rate DIRECTLY from credit score. instead, most will pull your whole credit report and use a proprietary secret algorithm to decision. so, there isn't a table that maps score to rate- that's a simplification
so who DOES decision and set rates based just on score?
Employers
Landlords
Car insurance companies
your credit score is the second biggest factor after your driving history to determine your car insurance rate in most states!
Employers
Landlords
Car insurance companies
your credit score is the second biggest factor after your driving history to determine your car insurance rate in most states!
despite regulation, credit scores are often sexist and racist.
why?
it's because they are an *accurate* reflection of a wildly sexist and racist society.
e.g. women are LESS LIKELY to pay back a loan because employers hate hiring them and paying them fairly
why?
it's because they are an *accurate* reflection of a wildly sexist and racist society.
e.g. women are LESS LIKELY to pay back a loan because employers hate hiring them and paying them fairly
lenders only care about defaults post-loan.
it's like if you're in charge of handing out tequila shots + mopping floors at a party.
Would you choose to give one to the person who has never had a drink before? or the person who has a beer every night of the week?
it's like if you're in charge of handing out tequila shots + mopping floors at a party.
Would you choose to give one to the person who has never had a drink before? or the person who has a beer every night of the week?
So don't give moral judgments to credit scores. Just your likelihood of repaying. The sober person is almost certainly HEALTHIER. We don't care about health - we care about ability to shoot tequila. Don't be offended if you have a low credit score because you always pay cash.
"tradeline" is the industry term for each account that shows up on your credit report. Having at LEAST two tradelines (ideally from different types of debt) is pretty important. Make sure to sign up for the Chime Credit Builder card for a low-risk new one http://member.chime.com/join/maiabittner
there's better games to play than increasing your credit score just to increase it, particularly after you cross a threshold.
it doesn't actually matter if you're not adding data/things to your credit report that your lender will care about.
it doesn't actually matter if you're not adding data/things to your credit report that your lender will care about.
ooh, the biggest credit reporting agency you've probably never heard of is Chex Systems https://www.chexsystems.com/
They furnish data on closed checking & savings accounts.
This is the most likely reason someone in the US would have trouble opening up a checking account.
They furnish data on closed checking & savings accounts.
This is the most likely reason someone in the US would have trouble opening up a checking account.
the US government does not have a centralized way to verify identity (this is kind of insane)
Because credit bureaus are interested in tracking specific people and their likelihood of repaying, they've weirdly become the de facto arbiters of identity in finance
Because credit bureaus are interested in tracking specific people and their likelihood of repaying, they've weirdly become the de facto arbiters of identity in finance
so this is going off the rails, but the way to create a synthetic identity in the US to commit is to just get anyone who furnishes data to the credit bureaus (usually lenders) to say that your fake name, address, DOB, and SSN all belongs to a real entity/person
they will believe you and store it! then the next time someone checks to see if that info is a person, the credit bureaus will repeat back that it is! 
when liability holders report to the credit bureaus is independent from when your payment is actually do. so, paying before your payment is "due" - though you don't get financial benefit - will often increase your score because it lowers the amount of debt you have
there’s no tokenization of PII. that means EVERY TIME a lender updates your info, they upload all your personal data: social security number, date of birth, address, name, etc. over SFTP. it’s a really insecure way to do business and that’s why it’s being leaked all the time.
you can disputing incorrect info on your credit report. it’s really annoying for furnishes to prove that it was actually correct, so if you dispute all derogatory marks, probably a bunch will just be removed.
Traditionally, liability holders reported data to the bureaus in exchange for getting the data on applicants.
This is why rent reporting makes bureaus nervous!!!! You’re reporting, BUT not on behalf of the liability holder.
This is why rent reporting makes bureaus nervous!!!! You’re reporting, BUT not on behalf of the liability holder.
it’s not easy to sign up to be a furnisher, of rental data or credit card data or anything. it’s a HUGE PROCESS. so even if you are doing something standard, it’s a huge process, so hey you might as well do something novel and interesting for credit reporting
yes! this is super important. wallstreet trades all lending risk based on fico. if you don’t have wall street you don’t have capital for a loan. so... talk about crazy network effects! really hard to break in with anything different/better to compete https://twitter.com/cedpvd/status/1299831227961077760
