NASDAQ.com 1 click away from quiz containing myth spread by Kiplinger

After you read the NASDAQ.com story with the common title, “How to Improve your Credit Score,” the writer invites you to take her credit score quiz (titled with another tired cliche: “Do You Know the Score on Your Credit?”).  Then, she slams you when you give the correct answer to one of her quiz questions.

Question 2 is “A bad credit score could affect your ability to get a job.”

If you respond with the correct answer, “B. False,” a message in bold, red letters exclaims, “Sorry, wrong!”

The consumer reporting agencies all state that they do not provide credit scores for employment purposes.  The Kiplinger’s contributing editor is the same excited Today Show guest (at 5:15) in the creditscoring.com video of electronic media journalists spreading the employers-use-credit-scores myth. She’s been doing it for years.

For more about inaccurate information from NASDAQ, see http://blog.creditscoring.com/?tag=nasdaq.

Credit score expert deems inquiries 5 points issue Myth #1

A credit score expert declares that an idea about credit report inquiries is the number one credit score myth.

The Myth

Tom Quinn, who recently departed from Fair Isaac (who wants to be known as FICO), writes that “Myth #1” pertains to the inquiries made to a consumer (credit) report. The top myth, he claims, is that every inquiry for credit costs 5 points in the score system.

To give the myth mongers some credit, the notion has some foundation, since the scoring company uses the number 5 in its brief official statement. However, the fatal flaw is the incomplete explanation in the paragraph mentioning “5 points.” It says that one additional credit inquiry made for the purpose of applying for credit may have no effect, at all, on a person’s score. Then it says that, for others, one additional inquiry would drop the FICO score less than 5 points (indeed, 4 points or less, in other words).

Words matter

But, that is where this consumer appeasement exercise by (oh, alright, FICO) FICO falls apart. It fails the logic test because it means that for others, still, an additional inquiry may cost 5, or even 6 points. And, in turn, for others beyond that, logically, it could mean that the algorithm drops the score 100 points, or even 400 points. Who knows?

That is probably not the case, but mathematically–based on the word problem–possible. If The Wizard had said, “For all others,” instead of just “For others,” you could make the (4-point, at least) assumption.  It is akin to a trick question.

Here is the ultimate inquiry query in this inquiry:  What is the maximum number of points that an inquiry can cost in the Fico credit score?

As unsatisfying as it is, Quinn’s brief and frank statement answers it: “There is no fixed set number of points that an inquiry will cost.”

Life lessons

While opinions vary on which myth is really #1, the one about 5-points-for-an-inquiry is complicated, and soundbite explanations just don’t cut it. When even The Wizard itself uses the phrase “typically only accounts for five points” (key weasel word: typically) it’s enough to pull your hair out.  Quinn’s explanation says that there is no certain number of deducted points associated with an inquiry, and that, generally, “inquiries have a relatively minor contribution” to the score.  Of course, that is not much to hold onto, either. But, perhaps, that lesson of his elegant brevity (the antithesis of this post) is inherent and based in wisdom and real experience from within the system: saying less is more.  Pundits and journalists love to publish numbers, so if you are in an interview and say “5 points,” you had better be sure that the writers get the nuanced part of the the figure, too. The results of the failure to do so can be disasterous.

Fortunately, we have this great, big (almost) world-wide, collective intertwined web thing that we can use to explain things to each other (and make corrections), Kumbayah.

Or not.

The Expert

So, what evidence does Quinn give to back up what he is saying about inquiries? None, but the guy has expertise few can claim: The score company ex-vice president is fresh from Capitol Hill, having testified on behalf of his former employer as late as last year. He joins another former insider, John Ulzheimer, as a credible expert (as opposed to authors blowhards and anybody with a website) making cogent public statements about FICO credit scores.  It ain’t much, verified, or proven publicly–and we can take it on faith or play the cynic–but it’s the best we’ve got.

On the other hand, even Quinn’s platform with the perfect, enviable name, Credit.com, gets it wrong about credit scores elsewhere on the same website.

Meh.  Whatever.  Myths are everywhere.

credit score, TIME: FICO suggests goodwill adjustment

For a while, the idea of the “goodwill adjustment” looked like it was dead.  It is a lie by a furnisher of information to consumer reporting agencies, and flies in the face of logic, ethics and, indeed, the law, which states

The banking system is dependent upon fair and accurate credit reporting. Inaccurate credit reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system.

Regardless of that naive federal wish, Fair Isaac, the FICO score company leads the charge with regard to the practice touted by experts, disgruntled consumers and media.

According to TIME Moneyland, (myFICO.com consumer operations manager Barry) “Paperno says you can request a ‘pay for delete’ agreement or ‘good will[SIC] adjustment’: you pay everything off in full and they remove the black mark from your report.”

Previously, TIME made a correction to one of its articles, although you would not necessarily know it.

In a day of loss of trust in bond rating agencies, the credit report goodwill adjustment baloney is a similar confusing signal in the consumer segment.  Taking the notion to the logical extreme, the consumer could withhold the last payment of an installment agreement unless the creditor agrees to remove all of the account’s history of late payments.  And why not?  Even FICO (with the help of TIME) suggests it.

You had better get on the moneywagon, too; the competition (the unethical consumer) is getting ahead.

“We have met the enemy and he is us.” – Pogo

RE: credit score, employers, Miller-McCune.com, DCI

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Monday, September 05, 2011 10:43 AM
To: Michael G. Aamodt, principal consultant, DCI Consulting Group, Inc.
Subject: RE: credit score, employers, Miller-McCune.com, DCI

See this message and your response at http://blog.creditscoring.com/?p=2463 and http://blog.creditscoring.com/?tag=miller-mccune.

You wrote, “However, it is important to note that employment credit histories do not include a credit score and thus it may not be accurate to generalize findings from credit scores.”

What indicates that employment credit histories do not include a credit score?


Greg Fisher
The Credit Scoring Site
creditscoring.com
PO Box 342
Dayton, Ohio  45409-0342

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Monday, September 05, 2011 10:16 AM
To: Michael Todd, editor, Miller-McCune.com
Subject: credit score, employers, Miller-McCune.com

See this message and your response at http://blog.creditscoring.com/?p=2460, http://blog.creditscoring.com/?tag=miller-mccune and myth.

You published, “If you’re unemployed and you’re behind on some credit card bills or you have a bad mortgage, suddenly your credit score might be another barrier to finding a new job and getting back on your feet.”

Who is your source regarding credit score use by employers?


Greg Fisher
The Credit Scoring Site
creditscoring.com
PO Box 342
Dayton, Ohio  45409-0342

credit score, employers, Miller-McCune.com

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Monday, September 05, 2011 10:16 AM
To: Michael Todd, editor, Miller-McCune.com
Subject: credit score, employers, Miller-McCune.com

See this message and your response at http://blog.creditscoring.com/?p=2460, http://blog.creditscoring.com/?tag=miller-mccune and myth.

You published, “If you’re unemployed and you’re behind on some credit card bills or you have a bad mortgage, suddenly your credit score might be another barrier to finding a new job and getting back on your feet.”

Who is your source regarding credit score use by employers?


Greg Fisher
The Credit Scoring Site
creditscoring.com
PO Box 342
Dayton, Ohio  45409-0342

Much ado about A Whole Lotta Nothing

It’s high drama at high noon at American Public Media and the demure New York Times.

JohnUlzheimer.com takes on A.WholeLottaNothing.org later today on APM‘s Marketplace Money.  Pay close attention to another example of the type of report in question, and compare it to the one in part 2.

So, in “What’s hurting your FICO score,” if that is number three in order of impact, then what is number one?

Make some popcorn and listen in.

9/30 update:  http://marketplace.publicradio.org/display/web/2011/09/23/mm-are-credit-scores-fair/