| Comment Number: | 514719-00060 |
| Received: | 4/18/2005 6:54:45 PM |
| Organization: | |
| Commenter: | angela Thompson |
| State: | OH |
| Agency: | Federal Trade Commission |
| Rule: | Notice of Proposed Study on the Effects of Credit Scores and Credit-based Insurance Scores on the Availability and Affordability of Financial Products |
| Docket ID: | 3084-AA94 |
| No Attachments |
Comments:
Credit scoring needs to be done away with. It is nothing but a scam for banks, finance companies and insurers to defraud the people. Our example is we went on vacation charged most everything on a credit card, it is safer than cash. We paid everything off at the end of the month. But since the due date for our accounts falls after they report to the bureaus, we had a large balances. Just so happens that the insurance company, checked out credit for renewal and then charged us $225 more per year for the home and $108 more per every six months of auto. When we called the insurer to complain they told us there was nothing they could do to remove those increases because the credit score told them we were a greater risk. We told them we wanted them to get a new score and they refused. So now we are stuck having paying $442 for the year because of our vacation. Since credit scores are basically good for one day, they do not show the true credit worthiness of a customer. My husbands brother when buying a house, found that he would have to pay a higher rate because the purchase of his new car the month before lowered his score because the new trade line was reported before he even had to make a payment. The mortgage company wanted to charge him a 6.75% rate but he could have 5.25%. Thats 1.5% more on a 300K loan which means he would have been paying $4500 more a year in interest. This is common practice. From myfico.com: Your FICO score only looks at information in your credit report. However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting. Credit scores – especially FICO® scores, the most widely used credit bureau scores – have made big improvements in the credit process. Because of credit scores: People can get loans faster. Scores can be delivered almost instantaneously, helping lenders speed up loan approvals. Today many credit decisions can be made within minutes. Even a mortgage application can be approved in hours instead of weeks for borrowers who score above a lender's “score cutoff”. Scoring also allows retail stores, Internet sites and other lenders to make “instant credit” decisions. Credit decisions are fairer. Using credit scoring, lenders can focus only on the facts related to credit risk, rather than their personal feelings. Factors like your gender, race, religion, nationality and marital status are not considered by credit scoring. Credit “mistakes” count for less. If you have had poor credit performance in the past, credit scoring doesn't let that haunt you forever. Past credit problems fade as time passes and as recent good payment patterns show up on your credit report. Unlike so-called “knock out rules” that turn down borrowers based solely on a past problem in their file, credit scoring weighs all of the credit-related information, both good and bad, in your credit report. More credit is available. Lenders who use credit scoring can approve more loans, because credit scoring gives them more precise information on which to base credit decisions. It allows lenders to identify individuals who are likely to perform well in the future, even though their credit report shows past problems. Even people whose scores are lower than a lender's cutoff for “automatic approval” benefit from scoring. Many lenders offer a choice of credit products geared to different risk levels. Most have their own separate guidelines, so if you are turned down by one lender, another may approve your loan. The use of credit scores gives lenders the confidence to offer credit to more people, since they have a better understanding of the risk they are taking on. Credit rates are lower overall. With more credit available, the cost of credit for borrowers decreases. Automated credit processes, including credit scoring, make the credit granting process more efficient and less costly for lenders, who in