Canada Day: Reuters falls for math myth, moth-to-flame

In this bicentennial year, with apologies to a gracious nation of people of warm hospitality, here is the belated Canada Day update.  Try the wines of Niagara-on-the-Lake, and the mussels and ice cream found there, originating at P.E.I.

And, now, on with the show.  It’s a doozy.

On his little Reuters website, a real media baron published this quote from a Fair Isaac spokesman, “‘Credit utilization (amounts owed as a percentage of available credit) counts for 30 percent of a person’s credit score.'”

It must have been given in writing (unless the dude can inflect parentheses).

The Fair Isaac statement is false because it is mathematically impossible.  Here’s the doozy part– a mind-blower:  The credit score company’s spokesman in the Reuters item even replied, “I understand well that ‘amounts owed’ is driven by half a dozen factors not just utilization.”

Yikes.

Credit score expert John Ulzheimer calls this nonsense a myth.

Win column:

Losers column:

and more.

But, consider the source– not the one in the journalistic sense, but the source of the reach of the repeated rumor: Reuters.  For another eyeful, see Canada Day, 2011: Reuters on employers and credit scores.

This monkey business about the so-called “credit utilization” is all Dr. Veghead‘s fault. A Kat Malone he is not.

A message to the really wrong Reuters rumor repeating rookie writer: Let me know when you have completed Poynter’s Math for Journalists: Help With Numbers.

credit score, employers, promotions, Gannett, Detroit Free Press

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Tuesday, August 16, 2011 6:52 AM
To: Jennifer Dixon, staff writer, Detroit Free Press, Gannett
Subject: credit score, employers, Gannett, Detroit Free Press

See this message and your response at http://blog.creditscoring.com/?p=2393.

You wrote, “They will likely take a hit to their credit score, which can affect jobs because some employers check credit scores before hiring or promoting workers.

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

consumer report accuracy, CDIA, Gannett, PERC, Arthur Andersen III

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Friday, June 17, 2011 8:55 AM
To: Stuart K. Pratt, president & CEO, Consumer Data Industry Association
Cc: Norm Magnuson, VP, public affairs, CDIA; Consumer Data Industry Association (CDIA)
Subject: RE: consumer report accuracy, CDIA, Gannett, PERC, Arthur Andersen III

See this message and your response at http://blog.creditscoring.com/?p=2141.

You wrote: “The end result of PERC’s study is that conjecture and opinions about accuracy have been replaced by empirical data. This is the only independent third-party study ever undertaken.”

So, was the 1991 study not independent, not third-party, or not a study?

————————————————————

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Sunday, June 12, 2011 7:35 AM
To: Consumer Data Industry Association (CDIA)
Cc: Norm Magnuson, VP, public affairs, CDIA
Subject: RE: consumer report accuracy, CDIA, Gannett, PERC, Arthur Andersen II

Please reply.

———————————————————– 

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Tuesday, June 07, 2011 10:04 AM
To: Consumer Data Industry Association (CDIA)
Subject: consumer report accuracy, CDIA, Gannett, PERC, Arthur Andersen

So, was the 1991 study not independent, not third-party, or not a study?


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

PREVIOUS POST

credit score, utilization ratio, MarketWatch, Wall Street Journal, News Corporation

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Tuesday, June 21, 2011 12:09 AM
To: Jennifer Waters, columnist, Consumer Confidential, MarketWatch, Wall Street Journal, News Corporation
Subject: credit score, utilization ratio, Consumer Confidential, MarketWatch, Wall Street Journal, News Corporation

 See this message and your response at http://blog.creditscoring.com/?p=2190, http://blog.creditscoring.com/?tag=wall-street-journal, and http://blog.creditscoring.com/?tag=news-corporation.

You wrote, “It’s a fussier method than that, but your utilization rate is worth some 30% of your score.”

Who is your source for the worth of the utilization rate?


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

UPDATE, 6/21/2011

From: Waters, Jennifer 
Sent: Tuesday, June 21, 2011 12:21 AM
To: ‘greg@creditscoring.com’
Subject: RE: credit score, utilization ratio, Consumer Confidential, MarketWatch, Wall Street Journal, News Corporation

Experian and TransUnion and FICO.

From: Greg Fisher
Sent: Tuesday, June 21, 2011 12:59 AM
To: Waters, Jennifer
Subject: RE: credit score, utilization ratio, Consumer Confidential, MarketWatch, Wall Street Journal, News Corporation, correction

Fair Isaac indicates that the proportion of credit lines used is only one of six items in an entire category which comprises 30%, “Amounts Owed.”

When will you make a correction?

Where do Experian and TransUnion make the statements you refer to?


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

UPDATE, 6/22/2011
Social media

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Wednesday, June 22, 2011 10:15 AM
To: Jennifer Waters, columnist, Consumer Confidential, MarketWatch, Wall Street Journal, News Corporation
Cc: Melissa Rudy; Emily Glazer, reporter, Wall Street Journal, News Corporation; Teri Everett, senior vice president, Corporate Affairs & Communications, News Corporation
Subject: RE: credit score, utilization ratio, Consumer Confidential, MarketWatch, Wall Street Journal, News Corporation, correction II

If

a + b + c + d + .30 + f = .30

then the sum of

a, b, c, d, and f must be zero.

But that must not be true since Fair Isaac said, for instance, regarding the 4th item in the category, “Your FICO Score considers the number of accounts you have with balances” (also, see Equifax, 1997).  Are we both talking about the same Fair Isaac?

What is your equation?

Also, could you find somebody to clean up the page titled, “One in Six Employers Looking At Your Credit Report, Study Finds”?  On the menu bar in Internet Explorer, click on View, then Source (Ctrl+U in Firefox and Chrome) to see the page’s HTML source code.  It still says, “Many employers are checking job candidates’ credit scores, but how big of a factor are credit scores in a company’s eventual decision to hire?”

And, another thing:  Please have Rupert Murdoch review the page titled, “How to Score a Free Credit Score.”  It says that employers use credit scores, and that is a myth.

And, one more thing:  Have Mr. Murdoch review the page titled, “Protect Credit Score.”  It has been a month.

See an example of an honorable correction by Gannett on its page titled, “Our view: Credit reports stacked against consumers.”


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

CDIA responds to Gannett regarding credit report accuracy

Gannett’s USA Today editorialized, “Instead of putting its money into better dispute resolution, the industry is more interested in trying to prove that error rates are small.”

In an opposing view, consumer reporting industry trade organization, CDIA, said:  “The end result of PERC’s study is that conjecture and opinions about accuracy have been replaced by empirical data. This is the only independent third-party study ever undertaken.”

However, in 2001, Associated Credit Bureaus (now CDIA) said, “In the only statistically valid study conducted to date, Arthur Andersen concluded that in only two-tenths of one percent of the over 15,000 cases studied, were consumers denied a benefit based on an error in their credit report.”

UPDATE, 7/6/2011

credit score, employers, Gannett, USA Today, 2011-06-05

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Monday, June 06, 2011 7:48 AM
To: Letters, USA Today
Cc: Robin Pence, VP, corporate communications, Gannett Co., Inc.; Brent Jones, standards editor, USA Today, Gannett
Subject: credit score, employers, Gannett, USA Today, 2011-06-05

See this message and your response at http://blog.creditscoring.com/?p=2125 and http://blog.creditscoring.com/?tag=gannett .

Yesterday, you published, “Credit scores can determine whether you get a mortgage and what the rate is; whether you qualify for a car loan, a credit card, a rental apartment or insurance; and, in recent years, even whether you get a job.”

However, in another story, you reported:  “When employers request information from the credit-reporting agencies, they get a report designed for employers or companies that screen employees. They don’t get the same report provided to lenders. And they don’t get your credit score, the numerical figure lenders use to assess the likelihood you’ll repay a loan, Levin says.”

Further, you also provide a link to a story that states: “In listing the ways that credit scores can be used, I wrote that potential employers look at your credit score to see if you’re under financial stress. Greg Fisher, who runs the website creditscoring.com, called me out on my mistake.”

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
937-681-3224

Gannett cites FICO as its source

[previous email to author]

From: Susan Tompor, columnist, Detroit Free Press
Sent: Tuesday, March 22, 2011 11:10 AM
To: greg@creditscoring.com
Subject: RE: Credit scores fall, Detroit Free Press II

The source on this was FICO.

Thanks,

Susan


From: Greg Fisher
Sent: Tuesday, March 22, 2011 1:10 PM
To: Susan Tompor, columnist, Detroit Free Press
Subject: RE: Credit scores fall, Detroit Free Press, 25.5

What is the name of the person representing Fair Isaac who—or what document—is your source regarding the notion that 10 percent is the ideal proportion of balances to credit limits?

Fair Isaac claims that the percentage of consumers who have a FICO score under 600 is 23.8%, not 25.5.  25.5% is a figure that represents consumers who fall under 600 in FICO 8, a credit score model not accepted in the automated underwriting guidelines of the two government-sponsored housing enterprises, and not even provided to consumers by Fair Isaac.  What is the name of the person representing Fair Isaac who—or what document—is your source regarding the 25.5% statistic?

Where do you publish corrections or clarifications for errors of fact?

You failed to answer that question.  Do you refuse to answer it, or do you not know the answer?

Detroit Free Press on credit utilization ratio

[previous email to author]

From: Greg Fisher
Sent: Tuesday, March 22, 2011
To: Susan Tompor, columnist, Detroit Free Press
Cc: Robin Pence, VP, corporate communications, Gannett Co., Inc.; Paul Anger, editor and publisher, Detroit Free Press
Subject: RE: Credit scores fall, Detroit Free Press II

Also, you wrote, “You’d want to use no more than 10% of your available credit for an ideal ratio.”

Who is your source regarding the ideal proportion of balances to credit limits?

Where do you publish corrections or clarifications for errors of fact?

See this message and your reply at http://blog.creditscoring.com/?tag=gannett.

[author’s response]

Gannett and the 25.5 percent under 600 FICO credit score statistic

From: Greg Fisher
Sent: Monday, March 14, 2011
To: Susan Tompor, columnist, Detroit Free Press
Subject: Credit scores fall, Detroit Free Press

You wrote: “Consumer credit scores sank to new lows after the recession.  FICO disclosed that 25.5 percent of consumers – nearly 43.4 million people – had a credit score of 599 or below, which means they’re deemed poor risks and either won’t get loans or will pay very dearly for credit cards, car loans or mortgages.”

What is the name of the person who—or what document—is your source for that statistic?

See this message and your reply at http://blog.creditscoring.com/?tag=25-5-percent.


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

[next email to author]

credit score, utilization ratio, Wikipedia reference to USA TODAY, unverified

SEE ORIGINAL EMAIL TO USA TODAY

From: Block, Sandra
Sent: Friday, February 04, 2011 11:47 AM
To: ‘greg@creditscoring.com’
Subject: RE: credit score, utilization ratio, Wikipedia reference to USA TODAY

http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

Sandra Block
Personal Finance Reporter
USA TODAY
You can find my stories and columns at: http://www.usatoday.com/community/tags/reporter.aspx?id=561
Follow me at:
http://twitter.com/sandyblock

From: Greg Fisher [mailto:greg@creditscoring.com]
Sent: Friday, February 04, 2011 12:51 PM
To: Sandra Block, reporter, personal finance, USA TODAY
Subject: RE: credit score, utilization ratio, Wikipedia reference to USA TODAY, unverified

SEE http://blog.creditscoring.com/?tag=usa-today-ratio.

That document does not verify your statement.  In it, 30% is a number assigned to an entire category called “Amounts Owed.” 6 items comprise the category.  For instance, one is “Number of Accounts with Balances,” and has nothing to do with the ratio of debt to available credit.  “Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)” is only one item in the category and is listed fifth.

What correction will you make?