|Interview: Evan Hendricks
|Page | 1 | 2 | 3 | 4 | 5 | 6 |
you really getting a FICO score?
have three FICO scores based on the credit reports from the big three credit bureaus,
but two of the big three credit reporting agencies sell credit scores directly
to consumers that are not FICO scores at all. Do you think people realize what
they're getting when they purchase these scores?
no, I don't. I've just seen many examples where a consumer's trying to be an educated
consumer and get an idea of what their score is and what's offered to them from
Experian and TransUnion are the knockoff scores, or FAKO scores. Those will differ
even more greatly than what the creditor will judge them on, in most cases. Partly
because the other scores such as the TransUnion TrueCredit score operate on a
different scoring scale. I think TrueCredit goes to either 900 or 950 -- whereas
the FICO stops at 850. So the TransUnion score will give the impression oftentimes
that your score is better than it is.
|Credit scores & credit reports|
To my knowledge,
lenders don't use any of these scores that are sold directly to consumers by Experian
or TransUnion. That's why they're called educational scores. But sometimes the
education is very bad.
offers & scores
people might think there's no need to check their score because the preapproved
credit card offers they're getting in the mail offer great rates. Would you discuss
why the rates and other come-ons mentioned in "preapproved" offers may not mean
that the consumer has a high credit score?
name of the game in credit cards is to acquire as many customers as you can and
then drive them up to as high an interest rate as you think that they will pay.
It's called "rate maximization." The name of the game is rate maximization, because
the higher the interest rate that card customers pay, the more the credit card
company makes. And so, there's a lot of ingenuity used in marketing to customers
that might be in precarious credit situations with large credit card balances.
That's where the whole balance-transfer approach came from. There's a certain
part of the market or the industry that likes catering to people with middle,
lower and really-low scores because they see there might be greater profit margins
there. That's what drove the whole subprime credit business for the last several
years, which now has the chickens coming home to roost.
the basis of the philosophy is: These are consumers that either have trouble saying
no to credit, or when they get credit, they have trouble managing it responsibly,
but if we give credit to them and they pay the way they're supposed to at our
rates, we're going to do very nicely. In some sense, it's kind of like a suckers
list. There are car dealers and others that will get lists of consumers who just
went through bankruptcy, and they start marketing to them. It comes it all shapes
So, you can't be sure you have a good credit score based on
the preapproved credit card offers you receive.