Bad news: The new FICO score changes could impact the credit cards you qualify for

[Steeleballz 7,550]

3 hours ago, Nature Boy 2.0 said:

Yes Capitol One! I understand they have 2 repos, 3 charged off credit cards, a BK 5 years ago resulting in a 490 credit score, but he said he will read Dave Ramsey and do better in the future so can you go ahead and say yes to that 45k  tacoma a 5%  lmao

 

Ps. I dont make a ton of money and live within my means. When i bought my Tundra the other day I was an 839 beacon. Not because I am rich but becuse I am responsible and will be in the future 

 

   I like some of his stuff, but it's sometimes another good example of why generic, one size fit's all advice is not really helpful. I've heard him tell people to sell their new vehicles and buy an old clunker. That's OK if you are mechanically inclined, but if you are not good with repairs and maintenance and you have a 50 mile commute, you can easily spend more on a used car than a new one. 

 

  For just generic advice, living within your means is actually better advice. If you can afford/budget for an expensive car and you really want it, go for it. If you have to eat potato's and rice to afford it, most people should probably to go a different route.  

[OriZ 3,157]

7 hours ago, Nature Boy 2.0 said:

Yes Capitol One! I understand they have 2 repos, 3 charged off credit cards, a BK 5 years ago resulting in a 490 credit score, but he said he will read Dave Ramsey and do better in the future so can you go ahead and say yes to that 45k  tacoma a 5%  lmao

 

Ps. I dont make a ton of money and live within my means. When i bought my Tundra the other day I was an 839 beacon. Not because I am rich but becuse I am responsible and will be in the future 

Ultimate proof that working for a car dealership doesn't mean you have any more of a clue than someone who's been working with financials for 15 years 

Edited January 26, 2020 by OriZ

[Nature Boy 2.0 8,330]

1 hour ago, OriZ said:

Ultimate proof that working for a car dealership doesn't mean you have any more of a clue than someone who's been working with financials for 15 years 

yea of course. what was proof

 

So you tell me, I have a 590 with 2 repos and a credit card charge off and late payment histories everywhere.How will you look into the future to determine you can loan him that 40G's on a New Tacoma.

[yuna628 9,547]

2 minutes ago, Nature Boy 2.0 said:

yea of course. what was proof

 

So you tell me, I have a 590 with 2 repos and a credit card charge off and late payment histories everywhere.How will you look into the future to determine you can loan him that 40G's on a New Tacoma.

Well.. yet there are still places that do let people buy cars with terrible history. My sister with her multiple bankruptcies, heavy debt, and collections coming after her managed to get one.. and I still don't know how that happened.

[Burnt Reynolds 5,058]

18 minutes ago, yuna628 said:

Well.. yet there are still places that do let people buy cars with terrible history. My sister with her multiple bankruptcies, heavy debt, and collections coming after her managed to get one.. and I still don't know how that happened.

Terrible history tends to mean financially inept, which tends to also mean desperate, which means more willing to accept a higher interest rate (and easy to justify given the risk), and is wonderful for dealers looking to unload cars they can't normally sell, especially used ones, and make a quick profit, as residual value falls as time goes on making it a greater waste of space.

[Nature Boy 2.0 8,330]

49 minutes ago, yuna628 said:

Well.. yet there are still places that do let people buy cars with terrible history. My sister with her multiple bankruptcies, heavy debt, and collections coming after her managed to get one.. and I still don't know how that happened.

Buy here pay here lots that carry thier own notes. They buy some sled for 2k at wholesale.  Sell it for 6 with a min 1500 down payment. If you miss one payment they cone get it ASAP and sell it again. They do huge business at tax time, then have high repo rates a couple of months later 

[Nature Boy 2.0 8,330]

29 minutes ago, Burnt Reynolds said:

Terrible history tends to mean financially inept, which tends to also mean desperate, which means more willing to accept a higher interest rate (and easy to justify given the risk), and is wonderful for dealers looking to unload cars they can't normally sell, especially used ones, and make a quick profit, as residual value falls as time goes on making it a greater waste of space.

Except if its a car we cant normally sell its usually becuse we got to much in it .

 

When that happens poor credit buyers are hard to get approved because the bank will not advance as much % of value on a used car, especially with a Boug. Boug is car slang for people with terrible credit. Short for bogus. 

 

Its much easier to get a boug approved for a lower end new car 

[Voice of Reason 10,298]

46 minutes ago, Nature Boy 2.0 said:

Except if its a car we cant normally sell its usually becuse we got to much in it .

 

When that happens poor credit buyers are hard to get approved because the bank will not advance as much % of value on a used car, especially with a Boug. Boug is car slang for people with terrible credit. Short for bogus. 

 

Its much easier to get a boug approved for a lower end new car 

But surely if the buyer promises to make more money next year, the loan will get approved.

[Nature Boy 2.0 8,330]

1 hour ago, ALFKAD said:

But surely if the buyer promises to make more money next year, the loan will get approved.

I dont know why someone that makes 2400% returns and can predict someone's future credit worthiness without looking into their past credit history, has not been snapped up by some fortune 100 company and paid millions of dollars

 

Example some Boug lenders factor in 30-40% repo rates overall. They factor this as a cost of business based on history.. Lets say they look at a certain Credit profile. Lets say a 650 Beacon.  Making 32K a year with slow pays and a charge off 6 years ago, but no serious derogs in the last 2 years on a 14K 2018 Nissan Sentra with 35K miles. Based on models and boatloads of past history data "guessing" it may come back and say there is a 25% chance of repo and we need to charge 15% interest to cover the cost of doing this loan on this credit profile and score.

 

 

 

Can you imagine how many millions of dollars it would be worth to them,  if we could predict with a fair amount of accuracy, regardless of past credit history, how likely they are to fulfil the obligations of this loan. This would be like the cure for cancer to the credit/financial industry. Almost zero risk for Mortgage, Instalment, Auto etc companies. Can you imagine a Mortgage company with a 0% foreclosure rate Credit bureaus would no longer be needed. The 2008 recession would probably not have happened.  The Individual  that figures out how to do this will be a billionaire many times over in a short period of time.

 

Sorry Oriz I cant argue with you about stock markets etc because I know so little about the subject. However you are dead wrong on this subject. The only possible way to predict someone's future credit worthiness is to examine their past credit responsibility. I know I am just a peon that works at a car lot and you have 15 years experience in the financial sector but you still wrong.

 

 

[OriZ 3,157]

1 hour ago, Nature Boy 2.0 said:

I dont know why someone that makes 2400% returns and can predict someone's future credit worthiness without looking into their past credit history, has not been snapped up by some fortune 100 company and paid millions of dollars

 

Example some Boug lenders factor in 30-40% repo rates overall. They factor this as a cost of business based on history.. Lets say they look at a certain Credit profile. Lets say a 650 Beacon.  Making 32K a year with slow pays and a charge off 6 years ago, but no serious derogs in the last 2 years on a 14K 2018 Nissan Sentra with 35K miles. Based on models and boatloads of past history data "guessing" it may come back and say there is a 25% chance of repo and we need to charge 15% interest to cover the cost of doing this loan on this credit profile and score.

 

 

 

Can you imagine how many millions of dollars it would be worth to them,  if we could predict with a fair amount of accuracy, regardless of past credit history, how likely they are to fulfil the obligations of this loan. This would be like the cure for cancer to the credit/financial industry. Almost zero risk for Mortgage, Instalment, Auto etc companies. Can you imagine a Mortgage company with a 0% foreclosure rate Credit bureaus would no longer be needed. The 2008 recession would probably not have happened.  The Individual  that figures out how to do this will be a billionaire many times over in a short period of time.

 

Sorry Oriz I cant argue with you about stock markets etc because I know so little about the subject. However you are dead wrong on this subject. The only possible way to predict someone's future credit worthiness is to examine their past credit responsibility. I know I am just a peon that works at a car lot and you have 15 years experience in the financial sector but you still wrong.

 

 

There are many ways to do it...you choose to stick with the ancient way the US does it, that's your choice. You also keep mixing up score with payment history despite my attempts at clarifying. Doesn't make me wrong. You do realize you can have 590 with a perfect payment history right? Again, look a little bit outside of the US where silly stuff like payday loans exist only to create more hardship for people, not to help them, and you might see the light.

 

Also, why would I bother working for anybody? My goal is to avoid that. 2019 was a transition year where I lived partially off our business and partially off my passive/active income/profits. By the end of this year it will be fully. And next year I'll even be moving to PR just so I can take advantage of their ACTs 20 and 22, and not have to work outside my house a day in my life. So I can sit here and argue with you all day but I'd rather keep working at changing the world for the better.

Edited January 27, 2020 by OriZ

[Nature Boy 2.0 8,330]

1 hour ago, OriZ said:

There are many ways to do it...you choose to stick with the ancient way the US does it, that's your choice. You also keep mixing up score with payment history despite my attempts at clarifying. Doesn't make me wrong. You do realize you can have 590 with a perfect payment history right? Again, look a little bit outside of the US where silly stuff like payday loans exist only to create more hardship for people, not to help them, and you might see the light.

 

Also, why would I bother working for anybody? My goal is to avoid that. 2019 was a transition year where I lived partially off our business and partially off my passive/active income/profits. By the end of this year it will be fully. And next year I'll even be moving to PR just so I can take advantage of their ACTs 20 and 22, and not have to work outside my house a day in my life. So I can sit here and argue with you all day but I'd rather keep working at changing the world for the better.

So you still have not told us how you judge someones likelyhood to repay a future loan without looking at credit history. 

[Steeleballz 7,550]

 

   Just to get back on track a little, I always get an email if my credit score changes, and then if I'm curious I can see why. Since it fits the discussion, I noticed it dropped by 5 points yesterday, and when I checked, the reason was an Amazon card that I had no balance on (and hadn't used for 3 years) had the limit cut to $500. I had forgot about this account really, since I didn't even have a physical card, so when I called to close the account, I asked why they slashed the limit and they said it's routine due to inactivity. 

 

  Anyway I think it does illustrate some of the deficiencies with the scoring system. Nothing that happened with that card reflects my ability to pay back debt and yet my score goes down. Closing credit accounts should make defaulting on loans less of a risk, but the score reflects you as being a higher risk if you do that.  Paying off a car loan 3 years early, closing the account, and having extra money in my bank account each month should really not be something that lowers a credit score. 

 

  I think there is validity to both sides of the argument you guys were having. The FICO score is an important tool for lenders to determine the ability to pay back, but also a very flawed one. Hopefully the changes will be more reflective of reality. 

 

  

[Burnt Reynolds 5,058]

15 hours ago, OriZ said:

There are many ways to do it...you choose to stick with the ancient way the US does it, that's your choice. You also keep mixing up score with payment history despite my attempts at clarifying. Doesn't make me wrong. You do realize you can have 590 with a perfect payment history right? Again, look a little bit outside of the US where silly stuff like payday loans exist only to create more hardship for people, not to help them, and you might see the light.

 

Also, why would I bother working for anybody? My goal is to avoid that. 2019 was a transition year where I lived partially off our business and partially off my passive/active income/profits. By the end of this year it will be fully. And next year I'll even be moving to PR just so I can take advantage of their ACTs 20 and 22, and not have to work outside my house a day in my life. So I can sit here and argue with you all day but I'd rather keep working at changing the world for the better.

Its a very general discussion. Looking into credit is really a cost-benefit, FICO is an instant low-cost/low-risk solution made with decades of risk management evaluation, but looking into a small window. Thankfully I pointed this out in the thread earlier, where people mistakenly assumed it was an actual question rather than critical discussion, not bothering to read this part:

 

On 1/24/2020 at 11:26 AM, Burnt Reynolds said:

Who actually uses these scores, or at least, gives them any real weight for lending?

 

Credit card companies? Cell phone providers? Renters? For meaningful issuance of credit, it's a minor snapshot, and numerous other financial ratios and instrument possessions wind up far more meaningful.

 

But it's also why they have the 5 C's -- character, capacity, capital, collateral, conditions. FICO is only a part of "character", which is creditworthiness. As the amount, length, etc. of credit issuance grows (as in, for higher-end cars, mortgage, etc.), the need to use the other C's becomes more necessary to widen that window because the risk does as well.

 

The use of FICO is really just indicative of human behavior, routines, etc. People who tend to make smart choices won't have problems getting a decent loan, or if they're the type to avoid credit and still smart, will pay for it in cash anyways. However, time after time people have learned that the use of credit has great advantages over cash, when used responsibly.

[Nature Boy 2.0 8,330]

55 minutes ago, Burnt Reynolds said:

Its a very general discussion. Looking into credit is really a cost-benefit, FICO is an instant low-cost/low-risk solution made with decades of risk management evaluation, but looking into a small window. Thankfully I pointed this out in the thread earlier, where people mistakenly assumed it was an actual question rather than critical discussion, not bothering to read this part:

 

 

But it's also why they have the 5 C's -- character, capacity, capital, collateral, conditions. FICO is only a part of "character", which is creditworthiness. As the amount, length, etc. of credit issuance grows (as in, for higher-end cars, mortgage, etc.), the need to use the other C's becomes more necessary to widen that window because the risk does as well.

 

The use of FICO is really just indicative of human behavior, routines, etc. People who tend to make smart choices won't have problems getting a decent loan, or if they're the type to avoid credit and still smart, will pay for it in cash anyways. However, time after time people have learned that the use of credit has great advantages over cash, when used responsibly.

Still there is now way to predict future behavior without looking at past behavior. I am not saying FICO is the start and end to all decisions, but its a good instant snapshot.

 

Another very important parameter is the value of the product VS What you are financing.

 

example- If you are a 750 with a long credit history, the deal will go in and the computer will buy it without a human ever looking at it. as long as the LTV is in line

               

 If you are a 650 I doubt the computer will buy it, someone will lay eyes on it and look at the everything. Sometimes the manager can call up and explain certain parameters and the loan agent will buy it. 

               

We also run into zero scores. Maybe a young person just entering the workforce or maybe an older person that has always paid cash. The lenders also have first time buyers programs for this situation.

 

The banks generally don't mind buying people recently out of BK, because they generally cant file again for a certain period of time.

[Burnt Reynolds 5,058]

2 hours ago, Nature Boy 2.0 said:

Still there is now way to predict future behavior without looking at past behavior. I am not saying FICO is the start and end to all decisions, but its a good instant snapshot.

 

Another very important parameter is the value of the product VS What you are financing.

 

example- If you are a 750 with a long credit history, the deal will go in and the computer will buy it without a human ever looking at it. as long as the LTV is in line

               

 If you are a 650 I doubt the computer will buy it, someone will lay eyes on it and look at the everything. Sometimes the manager can call up and explain certain parameters and the loan agent will buy it. 

               

We also run into zero scores. Maybe a young person just entering the workforce or maybe an older person that has always paid cash. The lenders also have first time buyers programs for this situation.

 

The banks generally don't mind buying people recently out of BK, because they generally cant file again for a certain period of time.

I think we're saying the same thing.