12 Million Americans Are About To Get An Artificial Boost To Their FICO Scores

Tyler Durden's picture

Back in August 2014, we reported that in what appeared a suspicious attempt to boost the pool of eligible, credit-worthy mortgage recipients, Fair Isaac, the company behind the crucial FICO score that determines every consumer's credit rating, "will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency. The San Jose, Calif., company also will give less weight to unpaid medical bills that are with a collection agency." In doing so, the company would "make it easier for tens of millions of Americans to get loans." Stated simply, the definition of the all important FICO score, the most important number at the base of every mortgage application, was set for an "adjustment" which would push it higher for millions of Americans.

 

As the WSJ said at the time, the changes are expected to boost consumer lending, especially among borrowers shut out of the market or charged high interest rates because of their low scores. "It expands banks' ability to make loans for people who might not have qualified and to offer a lower price [for others]," said Nessa Feddis, senior vice president of consumer protection and payments at the American Bankers Association, a trade group." Perhaps the thinking went that if you a borrower has defaulted once, they had learned your lesson and will never do it again. Unfortunately, empirical studies have shown that that is not the case.

Now, nearly three years later, in the latest push to artificially boost FICO scores, the WSJ reports that "many tax liens and civil judgments soon will be removed from people’s credit reports, the latest in a series of moves to omit negative information from these financial scorecards. The development could help boost credit scores for millions of consumers, but could pose risks for lenders" as FICO scores remain the only widely accepted method of quantifying any individual American's credit risk, and determine how much consumers can borrow for a new house or car as well as determine their credit-card spending limit

The transformation is already in proces as the three major credit-reporting firms, Equifax, Experian and TransUnion, recently decided to remove tax-lien and civil-judgment data starting around July 1, according to the Consumer Data Industry Association, a trade group that represents them. The firms will remove the adverse data if they don’t include a complete list of a person’s name, address, as well as a social security number or date of birth, and since most liens and judgments don’t include all three or four, the effect will be like wiping the slate clean for millons of Americans. This change will apply to new tax lien and civil-judgment data that are added to credit reports as well as existing data on the reports.

Civil judgments include cases in which collection firms take borrowers to court over an unpaid debt. Ankush Tewari, senior director of credit-risk assessment at LexisNexis Risk Solutions, says that nearly all judgments will be removed and about half of tax liens will be removed from credit reports as a result of the changed approach. He says LexisNexis will continue to offer the data directly to lenders.

 

In addition, if public court records aren’t checked for updates on lien and judgment information at least every 90 days, they will have to be removed from credit reports.

The outcome of this change is clear: it "will make many people who have these types of credit-report blemishes look more creditworthy."

The WSJ notes that the unusual move by the influential firms comes partially in response to regulatory concerns. The three reporting bureaus rarely tinker with the information that goes on credit reports and that lenders consult to gauge consumers’ ability and willingness to pay back debts.

The regulatory push to boost America's creditworthiness started at the top, under the guise of improving data tracking and collection:

The Consumer Financial Protection Bureau earlier this month released a report citing problems it found while examining credit bureaus and changes it is requiring. Issues the agency cited included improving standards for public-records data by using better identity-matching criteria and updating records more frequently.

 

Inaccurate information on credit reports, especially if it is negative information, can derail consumers from being able to gain access to credit and even lead to other setbacks like not being able to rent an apartment or get a job.

 

One in five consumers has an error in at least one of their three major credit reports, according to a 2013 Federal Trade Commission study mandated by Congress. The three credit bureaus received around eight million requests disputing information on credit reports in 2011, according to the CFPB.

It won't be the first time such an exercise is conducted: in 2015, as part of a settlement with the NY AG, credit-reporting firms were already prompted to remove several negative data sets from reports. These included non-loan related items that were sent to collections firms, such as gym memberships, library fines and traffic tickets. The firms also will have to remove medical-debt collections that have been paid by a patient’s insurance company from credit reports by 2018.

What happens next?

Such changes might help borrowers and could spur additional lending, possibly boosting economic activity. But it could potentially increase risks for lenders who might not be able to accurately assess borrowers’ default risk.

 

Consumers with liens or judgments are twice as likely to default on loan payments, according to LexisNexis Risk Solutions, a unit of RELX Group that supplies public-record information to the big three credit bureaus and lenders.

For lenders and credit card companies it means one thing: chaos, and the potential of substantial future charge offs: “It’s going to make someone who has poor credit look better than they should,” said John Ulzheimer, a credit specialist and former manager at Experian and credit-score creator FICO.

“Just because the lien or judgment information has been removed and someone’s score has improved doesn’t mean they’ll magically become a better credit risk.”

* * *

So how many US consumers will be impacted by this change? The answer: up to 12 million.

As the WSJ points out "removing this information from credit reports also will lead to changes in people’s credit scores. Roughly 12 million U.S. consumers, or about 6% of the total U.S. population that has FICO credit scores, will see increases in those scores as a result of this change, according to the company that created the FICO system, which is used by lenders in most U.S. consumer underwriting decisions."

While for many of these consumers, the score increase will be relatively modest, as FICO projects that just under 11 million people will experience a score improvement of less than 20 points, that should be more than sufficient to go out and buy that brand new $60,000 BMW with an 80-month, $0 down, 0% interest rate loan.

Sarcasm aside, ultimately lenders will still be able to check public records on their own to find this information, and since FICO scores will now be "adjusted" just like GAAP, the likely outcome will be the transition of credit vetting in house, as Fair Isaac loses credibility within the loan system, potentially leading to even more draconian credit terms, even if it comes at substantial expense to US-based lenders.

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JRobby's picture

The whole thing is rigged. Wake the fuck up!

Boris Alatovkrap's picture

This is same rating methodology that is give AAA+ to Bear Stearns MBS circa 2007? No need to mess up score with inconvenient default? Serious, what could go wrong?!

froze25's picture

Ehh, I have been the victim of a false debt collection that dinged my credit. So I look forward to this.

xythras's picture

"Artificial" I like the sound of that. Even though something wicked (not so artificial) will soon be upon us

Will Mid-March Madness Maul the Stock Market?

http://dailywesterner.com/news/2017-03-13/will-mid-march-madness-maul-th...

 


ParkAveFlasher's picture

Medical office took me to collections over a $20 copay 30 days passed due.  I settled it very quickly, turned out to be an error in their office.  However if it had slipped through the cracks in my stack'o'bills like a traffic ticket, it costs me $30,000 on a 30-year mortgage, right, wrong, or indifferent, over a payment slip miskeyed by the receptionist.

Our system makes sense!  Run by smart people!  Not at all fragile!

8774_44887's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

Logan 5's picture

FICO = Fuck If i Care Oligarch

Manthong's picture

F    FICO..

This is the chain that bonds all of the idiot slaves.

valjoux7750's picture

Exactly I could give a fuck about it. Got everything I need and if i want a newer car I'll put enough cash down to get a lower rate. Or pay cash

Twee Surgeon's picture

My old lady was buying some crap on line but the California Franchise Tax board had Swooped on her bank account, they got all of the $103 US Feral Reserve Coupons and she could not get the Japanese Rice Paper lamp covering she wanted to be delivered (for $9 Bucks.), a slight interference in Interstate Commerce from an out of state lamp paper distributor, to fix up the nice cylindrical 4 foot high, 1950's lamp thing's lamp shade that she got at a yard sale for $4 bucks.

Some Mexican has got her info and SSI down in California and have Got a job but neglected to pay the taxes.

So she calls the Cali (Cartel) Franchise Tax Board after having a fucking episode at the local bank that happily did not turn violent.

The California Franchise Tax Board plays a game called 'Talk to the Robot' That is all you will be talking to on day one, A Scumbag will call you tomorrow, or some shit.

No Court order or Judgement, just, "We took all your Jeffrey Dollars and you are fucked forever, too bad, so sad." No information from the bank other than 'Call the California Franchise Tax Board.

She lived in California when she was 3 years old ! 1966, I'm guessing, 19 fucking 66 and some wetback has her SS Number so SHE is Fucked until her Imaginary Lawyer makes it all good ? We cant afford a Lawyer for that shit, I have not had Roast Beef in Months but the Food Stampers are Chowing down on local Salmon, What the fuck is wrong with that picture ? No Court order, No evidence, Nothing other than "You are fucked, we have stolen your shit but we hope you will continue to Trust the Banking system." These people are off of their fucking rockers. Call me 'Firing Squad Volunteer.'

DumpsterFire's picture

The Peoples Republic of Maryland issued a false tax lean against me for taxes I did not pay on property I did not own.  Two of the credit agencies removed the false info pretty quickly but one (Experian) refuses to this day to eliminate the mistake.  They also will not remove information for some dude with the same name in NV but different SS#, DOB etc.  I have provided them with information and given them the number to the MD comptroller who confirms that the debt is not mine.  They (Experian) state that they do their own investigation and basically told me to fuck off.  So, I have 2 great scores and one shitty one. 

Maybe this is backlash from screwing over people in a similar manner who have resources and political pull.  There seems to be no accountability for the FICO agencies.  I have to walk the underwriter through the MD fuckup with supporting information for mortgage loans etc., and I still get to pay a higher rate.  Will some people get let off of the hook with this?  Probably.  But lets not pretend FICO is innocent here.  

 

wren's picture

All it will do is let more people take out loans, thereby allow the bankers to create more digital currency at something like a 10-1 ratio. This will put families further in debt and our childrens childrens children will get to pay the debt.

Arrow4Truth's picture

Wow... $7K a month. I bet you don't give a shit about FICO either. (whut a maroon)

flicker life's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

True Blue's picture

And I have been wrongfully targeted by the State Revenuers; even once I proved beyond any doubt that their claim against me was wrong (on several levels) the fact that there had been a (wrongfully imposed) lien against me made it impossible to obtain a mortgage.

They have next to no burden of proof to obtain a lien or judgment against a person and it can take a year or more of fighting them in court just to get it removed (I had to get my Congressman on it in the end) but it still shows up negatively on my credit (scam) report.

kommissar's picture

totally agree!  same happened to me: state of orygun said i owed them $10k, and how do i want to take care of that?  i don't. they garnisheered my wages, seized bank accounts, etc. what they didn't know was, at the time i was a corporate beuraucrat and spent my whole day haggling with auditors, attorneys, etc anyway, so challenge accepted!  

got the whole thing dropped, but but it hosed my credit for about two years.  OH! and in orygun, when they come after you, YOU become the plaintiff!!  no presumption of innocense, no burden of proof on the state!!  fer fuck's sakes, you have to figure out how they came up with the number, reverse engineer their state employee mindset and finally prove them wrong.  in court.  good luck with that, if you're just a small bidness owner.  

i moved to washington. fuckem.

canisdirus's picture

Why didn't you dispute it?

Mind you, these credit reporting agencies are pretty freaking evil, but I have yet to encounter a case where they didn't correct your report. In fact, it has been so easy that I feel like some people could easily game the system.

Then again, I game it like crazy. I never have more than a couple hundred in CC debt showing because I keep track of when reporting happens and pay them off in time to ensure only the most recent charges show. It boosts my credit score by quite a bit.

divingengineer's picture

I have never gamed it. I paid my bills for about 25 years without stiffing anyone. Now it's well over 800. 

I don't do anything special. 

Donald J. Trump's picture

Me too.  They also need to get rid of the credit pulls.  In fact, the whole credit report methodology needs to be scrapped and a better system put in place.  Your credit report has substantial effects on your life and you're at the mercy of many variables that you hve no control over and little recourse to correct.

A Nanny Moose's picture

Gonna be great when FedGov redistributes that new house, bought with a $500,000 loan. Will this require another bailout?

Giant Meteor's picture

Sure, sure it is a scam. Here is the thing. Any "artificial boost" to anyone's FICO score shows the desperation of this whole shitshow. CNN is on in the background here, loud, and as I listen in we are talking Don Lemmon and guests who are in HYSTERICS regarding Trump. You add up all these pieces, just in the top few headlines here tonight and it ain't a pretty fucking picture.

People talk about wait till 2018 etc. I believe this is "optimistic."

The Russians, The Russian .. The news out of Turkey, China (sales are down) 

No Where in this globe, where there is NOT a giagantic shit show ..

Kellanne Conway clip being played, talking about mass surveilance. The guest painting her without saying so directly, INSANE and should not be listened too. Don Lemon leading the charge ..

Guest, its NOT silly (meanng Conway) ITS DANGEROUS ..

"We are being destabilized by RUSSIA !"

Holy Shit !

https://www.youtube.com/watch?v=YEt41bYQBgE

divingengineer's picture

They are not trying to boost people in the middle. They are trying to bring more people into the lower end. That's where the money is, probably. They don't seem to be concerned with the default rate, so I guess its "Party On", Wayne. 

And you're right, scraping the bottom of the barrel at this point. Smells of desperation, without expansion the whole thing just collapses back in on itself like a dying star. 

3LockBox's picture

Skip tracing heaven!

Bill collectors will be going nuts.

Belrev's picture

Sean Spicer says we can trust the President when he is not joking.

https://www.youtube.com/watch?v=S10RyuiEHqw

Takeaction2's picture

I know many of you people don't understand...but for someone like me this is great.  I had a score of 820.  Then I donated to Ron Paul and Rand Paul and like magic...had to go through a 2 year Audit.  The Audit with my attorneys resulted in me owing $63,000.  I am blessed...and was able to pay it.  But when the IRS gave me the bill for $63,000 they automatically put a lien on one of my homes even though I paid this off quickly.  These liens stay on your credit for 10 years.  My credit was around 820....a Lien takes 100 points off.  I called all of the credit bureaus and they said "That is the way it is..."  So this will help me...not because I am a deadbeat...but because I use credit correctly and was unjustly punished by having a lien "Code" put on my credit rating.

spastic_colon's picture

so why'd you pay the 63k? if it was incorrect you should have fought back with your attorney/cpa in tow; took me 7 years but they finally agreed to a reconsideration and wiped out 80% of what i owed including penalties and interest and they never filed a lien.

its much easier but time consuming to prove your correct than trying to get money back from the IRS.....plus if you have money you should'nt give that much of a shit about credit scores; any smart lender will understand the situation if you really need the credit; all that matters is personal guarantee or not.

Takeaction2's picture

Why...because you are fighting the IRS...they originally wanted $457,000.  So $63K was good....and I paid it.  You have no clue what you are talking about with this statement...
 ".plus if you have money you shouldn't give that much of a shit about credit scores"  

.

Once you are in the real world dealing with big money  Credit score is everything.  You leverage yourself...  You say "Smart Lender"  Really???  They have their rules. IT is not a person deciding....  There is a big difference between a shit score of 720 compared to 820 or 830...  With 820 or 830...you walk into anywhere and sign your name for nearly any amount at 1.9 to 3.4% interest.  With 720....you need to prove over and over why your score is that low. And if you have lower than a 720-750 credit score...PLEASE.....learn to run your life. 

.

remember this...

Tax problems are good problems that most don't have...

..

..

Also...a note about what I learned about the IRS in a 2 year audit.

#1...they are people being told what to do...and you work with them to get to an end result.

#2 NEVER do your taxes yourself.  Always have a reputable firm do them...with attorneys that know the law inside and out....If you just get a W-2...then you won't get it.

#3  The IRS is a slow moving frieght train..it may be slow to catch up with you......get in front of it..(Play Games with your return) and when it hits you, there is no stopping it.  So it is best to stay off the tracks...don't get hit.

kommissar's picture

i understand.  thanks for the advice!  i also donated to the pauls.  i'm sure it's just a coincidence that i've drawn similar scrutiny.  total coincidence.  i didn't contribute that much in the grand scheme of things, though, so hopefully i won't be punished with as big a bill as you were.

spastic_colon's picture

.they originally wanted $457,000.  So $63K was good......is all you had to say; the rest is just blather.

good for you for using your own money; you don't get an atta boy tho for risk mitigation; why use a traditional bank at all? i assume you reduce or eliminate your risk thru operating so none of your investors see's it; if you don't you're a piker; but thanks for the bullet points, I'll use them in my next investing/tax 101 course.

chubakka's picture

wide awake just cant do shit about it.

jus_lite_reading's picture

EVERYBODY GETS A TROPHY!

ALL RACES ARE EQUAL!

MY SHIT DON'T STANK!

MICHELLE OBAMA IS A WOMAN!

BARRACK OBAMA IS A CHRISTIAN!

CENTRAL PLANNING IS THE BEST WAY!

GOVERNMENT KNOWS BEST!

 

847328_3527's picture

More crappy loans, etc coming down the pike resulting in more shit on the hard working American who will be forced to bail the losers out.

STOP bailing out the banks with free money!

 

Banks should be forced to keep 50% of the loan with NO government guarantees so they eat their own shitty bad loans.

JRobby's picture

Let them eat shit instead of caviar

CaptainObvious's picture

+100  This is like letting a violent gangbanger out of jail, expunging his record, and saying, "Well, he served six months and learned his lesson.  He will never kill again!"  And then the gangbanger walks down the road, robs a bank, kills six people, and sets up a narcotics ring big enough to flood the Pacific Ocean with heroin.

This just makes giving deadbeats a bunch of slave loans much easier, and the bankers front-load the interest, so they get richer, and then they shovel the bad loans onto the taxpayers, saying that they can't be responsible for the unresponsible people who didn't pay their debts, when they never should have been given credit in the first place if bankers would do their fucking jobs correctly.  Actually, let me correct myself:  bankers are doing their jobs correctly in the new reality:  bankrupt everyone and collect all the wealth.

You know what used to happen when banks made bad loans and were not repaid?  They went bankrupt and locked the doors.  Their depositors lost everything, but hey, the depositors fucked up and trusted them.  The rest of us didn't get screwed, just the idiot people who trusted the bad bank.  Nowadays, it's a free-for-all ass raping, bankers looking around to see who still has some seed corn in the silo, swooping in and consuming it, until we all die of starvation.  Last man standing wins, or something.  What a great plan.

In conclusion:  Death to the moneychangers.

847328_3527's picture

You are 100% correct! In the 1980's over 750 financial people and bankers went to jail.

Under Bush and Soweeto bin Bama almost zero.

I asked a banker one time why he was making loans to all these people who obviously would never be able to pay back and many would default.

He said by the time the probems arise, he would have already collected his bonuses for all the loans and a promotion to a different area and be long gone. So, he said, "it's not my problem."

kommissar's picture

you're completely full of shit!  you have no idea what happens with state tax agencies or the irs!  medical judegements are also ruining people, and keeping them from being able to live in their own home, or even move forward in any way possible, by establishing revolving credit.  

good for you!  you've never had any of this adversity, because if you did, you wouldn't be talking out your ass.  deadbeats will still have shitty scores, btw, but you don't seem to realize that.

44magnum's picture

What a fucking joke.

swmnguy's picture

Eh, FICO scores have never been exactly what people seem to think they are.

For one thing, which FICO score?  There are almost unlimited different FICO scores.  A banker at my credit union told me there are different scoring formulas used depending on whether you want to buy a house, or a car, or get a credit card, among other things.  FICO sells different formulas to different clients.

And just between different banks, you see different scores.  I have 3 different accounts that allow me to see "my" FICO score.  They're all different every month.  One of them fluctuates wildly, depending on whether I've just paid my credit card bills when they pull the monthly "snapshot," or whether I'm just about to pay them.  I pay all of them in full every month and have for decades, and I never use more than about 3% of my available credit at any given time.  So why the wild, and I mean 30-40 point, fluctuations?

That credit ratings could be used to set insurance rates and for hiring purposes is scary.  As scary as relying on fingerprint "evidence" in court, or "lie detector tests" for anything at all.  It's a false reliance on something that isn't objective and isn't consistent. 

 

Dave Thomas's picture

With so much information floating out there, I would assume that even background checks and criminal records are checked. Soon they'll graft in Social Media metrics into their lending process. The more they know about you the better, and yeah FICO will be one tiny window looking in the entire house that is your life.

canisdirus's picture

The fluctuations are probably a thin file and the extreme changes in debt levels due to the credit card balances. The easy solution is slightly counterintuitive and will give you a longer-term credit hit, but it's to get more credit cards with big limits. We're talking enough that you'll rarely exceed 1% utilization. Beyond that, use my trick: Keep track of those reporting dates you see in your file and pay off each card with enough time for it to clear right before the reporting date. Just doing that one thing gained me a solid 10 points and I'm into the 800s, anyhow.

order66's picture

"They don't meet our minimum loan qualifications though."

"Here, move over a sec.....[type] [type] [type] [enter]....How about now?"

"Perfect."

Yukon Cornholius's picture

I think they did this with IQ a couple of decades ago. Dropped the retardation score to 70 from 85 in order to keep more, uh, people, in prison.

TxExPat's picture

It was in sync with getting away from "insane asylums".  Can't warehouse them in the Asylum any more, yet some of them are a threat to themselves and others if you just chunk them out in the street.  Warehouse them in Prison instead (it's cheaper anyway). 

Most of the retarded are not a theat to society, but what do you do with the ones who are if you don't want to spend much money on them? 

 

 

 

inflationbull's picture

Basically everything could go wrong and the fact is that we are already spiking prices out the yin www.inflation.co

crossroaddemon's picture

Wonderful! This is good news. Everybody go get some credit cards, load the fuckers up, and then throw the statements away.