Right for a Credit Score

[merig00.livejournal.com]

Jackals of capitalism come up with new ways how to put down the hard working americans every day! Here for example AP is reporting that

Some homeowners who sign up for the government's mortgage assistance program are getting a nasty surprise: Lower credit scores.
For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points.
/.../
Housing counselors say it's unfair, especially because the news often comes as a surprise to homeowners.
"Why should people's credit be hurt even worse when they're trying to do the right thing?" said Eileen Anderson, senior vice president at Community Development Corp. of Long Island, a housing counseling group in New York.

Think about it: people on the brink of bankruptcy are turning to government for help, and get an unpleasant surprise - the rating agencies consider in their credit rating calculations, that these people are on the brink of bankruptcy, and they will now be harder to get into debt even deeper! Every day - new horrors!
It's not fair, isn't it? Frankly, it would be much better and fair if to everyone the government gave out a fair credit rating - no less than 750. And if you are a minority - no less than 780, I mean minorities got it hard as it is. That would be fair and truly american!

Thank you for attention.

Comments

[chessdev.livejournal.com]

It's not different than if you tried to short sell your house to avoid foreclosure -- you are "trying to do the right thing" but your credit gets ripped up.

It's not the Obama Administration doing this -- it's the credit agencies when they record that you did not meet the original obligation and needed to change terms. It's not about "intent" to do the right thing, it's about the **risk** your situation represents.

[merig00.livejournal.com]

But evil rating agencies ruining financial history for thousands of americans!

[chemchick.livejournal.com]

chessdev speaks the truth. I don't understand your sarcasm.

[merig00.livejournal.com]

read the article :)

[chessdev.livejournal.com]

Well that is a valid concern -- it's just not the Obama Administration doing this...it's the credit rating agencies.

[eracerhead.livejournal.com]

What boggles my mind is, How could you not expect your credit score to go down when you tell a major lender you are struggling to make payments? It would have gone done a whole lot more if they had declared bankruptcy.

[chessdev.livejournal.com]

No kidding.

I like how the article goes out of it's way to keep naming "The Administration's program" when it's the credit agencies that are responsible fo this.

And yes, WHY would people expect their credit to not change in that case?

[the-rukh.livejournal.com]

I think you're missing his point. He's supporting the people getting their credit scores lowered for seeking help for their issues.

[chessdev.livejournal.com]

Good point -- I missed the sarcasm. It's hard to tell when he's serious and when he's kidding because his theories *do* sound like jokes much of the time.

[eracerhead.livejournal.com]

Yeah, I mean honestly the credit scoring process is about as unbiased as you can get. I think a lot of people really do not understand credit. When it is OPM - Other People's Money, those other people get to call the shots.

[jennem.livejournal.com]

The credit scoring process is biased towards lenders. It is not "unbiased."

If you even talk to a homeowner's insurance company before you lock in your interest rate, your credit score lowers and lenders will use that to push higher interest rates at you. It doesn't recognize if you totally pay off your credit card bills each month (it just notes that there is a different balance each month). The list goes on and on.

While I think it's a tad ridiculous for home owners to expect to be able to take part in a program that saves their house without having their credit score change, you're delusional if you think the credit scoring process is unbiased. It heavily favors lenders to the detriment of credit worthy borrowers.

[eracerhead.livejournal.com]

It is unbiased in the sense that the same statistics are applied to everyone looking to borrow. Lenders want to lend you money, that is what they do. The credit score just quantifies the risk associated with that lending. It is still up to the lender to decide regardless of the score and this may be the bias you are talking about.

Last year when I refinanced my house I had three lenders competing for a measly $420K loan. I negotiated for the lowest rate, lowest fees and best terms. In my case the credit score under your definition was biased toward me. I'm not alone in that. If you have a good credit score, you will get a better deal. Same thing with credit cards. If they change or you don't like the terms, apply for a better one. You cannot do this if you have a low score as you generally have to beg, so the solution is to improve your score, something most people actually have control over (e.g. don't borrow or apply for more than you can afford, pay on time and check your credit report for incorrect information then correct it). BTW my credit score wasn't always good, so I have experienced both ends of it.

[jennem.livejournal.com]

You're missing my point. Even though the same statistics are applied to every borrower, the data used by credit scoring agencies favors lenders over borrowers. I pay off my credit card every month. A credit score doesn't take that fact into consideration because it only cares if you have credit card debt and the amount owed each month. It doesn't consider the payment of the debt in full in it's calculation. So, while it's favorable to a) have access to credit and b) to keep at least a nominal balance with that credit, I don't get any points for using the card and credit responsibly. Same goes with homeowner's insurance. If you take out an insurance policy before you sign your loan agreement, it will lower your credit score and banks will then use that to increase the rates, even if you're doing both things contemporaneously because of the way credit scoring agencies use the input of that information. They might do the same thing to everyone, but doing the same thing to everyone favors the lender over the borrower.

I have good credit, and I'm in the process of making four banks compete for the home loan I'm about to take out, but I would have an even better bargaining position if the credit scoring agencies utilized the data neutrally.

[dzlk.livejournal.com]

I think a lot of people really do not understand credit.

I think a big part of the problem is that people don't understand what a statistical inference is. The same misunderstandings happen with insurance, for example.

A credit score is just a statistical expectation. A poor score means that people in the equivalent financial situation are subjectively (in the statistical sense) more likely to have problems. It's not necessarily an accurate reflection on you as an individual and it's not meant to be. It's meant to be an accurate measure of the lender's expectations.

[eracerhead.livejournal.com]

Agreed. I assume that people know what statistics mean, and I am often disappointed.

[prisoner--24601.livejournal.com]

What amazes me is that people didn't expect their credit to go down, like they're somehow entitled to have a good credit score the same way the people who are making the full payment on time without any modification.

I'm not a fan of the whole credit score system, but damn, what a bunch of entitled whiners.

[kardashev.livejournal.com]

Indeed. I pay my bills on time and scrupulously to maintain my credit rating. And the only time I've ever actually used my credit is for my mortgage.

I'm not rich. But I know how to squeeze a dime so hard that it screams "Rape!"

[sgiffy.livejournal.com]

Sure I made a shitty decision to take out a loan for a house I can't afford, but I don't see why that should be held against me! What is this? Soviet Russia?

[dzlk.livejournal.com]

Everyone keeps forgetting the two basic truths of credit scoring.

1. It's not fair. It's not meant to be.
2. It's not personal. It's not meant to be.

[kardashev.livejournal.com]

It's not fair. It's not meant to be.

You make credit sound like a metaphor for life itslef.

Not that I'm disagreeing.

[dzlk.livejournal.com]

You make credit sound like a metaphor for life itslef.

Not intentionally, but if people interpret it that way I'm not going to complain.

[3fgburner.livejournal.com]

Headline: Credit scores can drop after getting loan help

No shit, Sherlock.

[dwer.livejournal.com]

while I agree that the homeowners should be notified, I don't see the logic behind suggesting that there should be no effect at all.

[kardashev.livejournal.com]

You have a point, sir.