[hannah]

First of all, Fair Isaac is for profit company not a government agency. For fiscal year 2006, Fair Isaac revenues totaled $825.4 million vs. $798.7 million in 2005. In their Annual Report they state, “The top priority for Fair Isaac’s management team and Board is revenue growth.” Not accuracy in any of their analytical and technology products but $$$REVENUE$$$!!!!!!!

The following describes their scoring models:

Scoring Solutions

We develop the world’s leading scores based on third-party data. Our FICO scores are used in most U.S. credit decisions, by most of the major credit card organizations as well as by mortgage and auto loan originators. These scores provide a consistent and objective measure of an individual’s credit risk. Credit grantors use the FICO» scores to pre-screen solicitation candidates, to evaluate applicants for new credit and to review existing accounts.

The FICO» scores are calculated based on proprietary scoring models. The scores produced by these models are available through each of the three major credit reporting agencies in the United States: TransUnion, Experian Information Solutions, Inc. (“Experian”), and Equifax. Users generally pay the credit reporting agencies scoring fees based on usage, and the credit reporting agencies share these fees with us.

The most powerful of our U.S. credit bureau products, NextGen FICO» risk scores, are also available at all three major credit-reporting agencies. NextGen FICO» risk scores provide a more refined risk assessment than the classic FICO» risk scores.

We have expanded our scoring portfolio by analyzing data that is unavailable through the three major U.S. credit reporting agencies. The FICO» ExpansionTM score provides scores on U.S. consumers who do not have traditional FICO» scores, generally because they do not have any credit accounts being reported to the credit reporting agencies. The score analyzes multiple sources of non-traditional credit data accessed by our subsidiary, Fair Isaac Network, Inc., and the score and associated reports are provided to lenders through a subsidiary called Fair Isaac Credit Services, Inc.

The Fair Isaac» QualifyTM score helps marketers find prospects on their promotional mailing lists who are most likely to respond and to be approved for credit. This score is based on commercially available sources of marketing data, and is delivered by Fair Isaac.

We have also developed scoring systems for insurance underwriters and marketers. Such systems use the same underlying statistical technology as our FICO» risk scores, but are designed to predict applicant or policyholder insurance loss risk for automobile or homeowners’ coverage. Our insurance scores are available in the U.S. from TransUnion, Experian, Equifax and ChoicePoint, Inc., and in Canada from Equifax. In fiscal 2005, we introduced a new kind of insurance score called the Property PredictRTM score, which analyzes property inspection database data from an insurance services provider, Millennium Information Services, Inc., to calculate the loss risk of a property.

Note the part I have bolded in red. CRA? Certainly sounds like it. We should all write Fair Isaac and ask for our free report!

No wonder they sued the Big Three! Not only that but it sounds like your FICO score will be based on information that is not covered under the FCRA and there will be no way to dispute it. In the section of the 2006 annual report that describes their competition they even list

providers of credit reports and credit scores

and

Scoring Solutions
In this segment, we compete with both outside suppliers and in-house analytics and computer systems departments for scoring business. Major competitors among outside suppliers of scoring models include the three major U.S. credit reporting agencies, which are also our partners in offering our scoring solutions; Experian-Scorex, TransUnion International, CRIF and other credit reporting agencies outside the United States; and other data providers like LexisNexis and ChoicePoint.

When asked about the lawsuit they stated:

How will your lawsuit against the three major U.S. credit reporting agencies affect your business?” We filed this lawsuit in 2006 to ensure that we have a fair and competitive marketplace for our scoring products. We expect to conduct business as usual with our partners during this time, and we do not foresee any major impacts to our FICO® score revenues. After all, the FICO® score’s superior performance has made it the standard measure of U.S. consumer credit risk, accepted not only by lenders but by investors, the secondary market, rating agencies, mortgage brokers and consumers.

We rely on relatively few customers, as well as our contracts with the three major credit reporting agencies, for a significant portion of our revenues and profits. If the terms of these relationships change, our revenues and operating results could decline.

We also derive a substantial portion of our revenues and operating income from our contracts with the three major credit reporting agencies, TransUnion, Equifax and Experian, and other parties that distribute our products to certain markets. We are also currently involved in litigation with TransUnion, Equifax and Experian arising from their development and marketing of a credit scoring product competitive with our products. We have asserted various claims, including claims of unfair competition and antitrust, against each of the credit reporting agencies and their collective joint venture entity, VantageScore, LLC. This litigation could have a material adverse effect on our relationship with one or more of the major credit reporting agencies, or with major customers.

The loss of or a significant change in a relationship with a major customer, the loss of or a significant change in a relationship with one of the major credit reporting agencies with respect to their distribution of our products or with respect to our my FICO offerings, the loss of or a significant change in a relationship with a significant third-party distributor or the delay of significant revenues from these sources, could have a material adverse effect on our revenues and results of operations.

We rely on relationships with third parties for marketing and distribution. If we experience difficulties in these relationships, our future revenues may be adversely affected. Our Scoring Solutions segment and Strategy Machine Solutions segment rely on distributors, and we intend to continue to market and distribute our products through existing and future distributor relationships.

Our Scoring Solutions segment relies on, among others, TransUnion, Equifax and Experian. Failure of our existing and future distributors to generate significant revenues, demands by such distributors to change the terms on which they offer our products or our failure to establish additional distribution or sales and marketing alliances could have a material adverse effect on our business, operating results and financial condition. In addition, certain of our distributors presently compete with us and may compete with us in the future either by developing competitive products themselves or by distributing competitive offerings. For example, TransUnion, Equifax and Experian have developed a credit scoring product to compete directly with our products and are collectively attempting to sell the product. Competition from distributors or other sales and marketing partners could significantly harm sales of our products.

Sounds like this company is whining about its competition!!

Further in the report they talk about exposure to liability….

Government regulations that apply to us or to our customers may expose us to liability, affect our ability to compete in certain markets, limit the profitability of or demand for our products, or render our products obsolete. If these regulations are applied or are further developed in ways adverse to us, it could adversely affect our business and results of operations.

Legislation and governmental regulation affect how our business is conducted and, in some cases, subject us to the possibility of future lawsuits arising from our products and services. Globally, legislation and governmental regulation also influence our current and prospective customers’ activities, as well as their expectations and needs in relation to our products and services. Both our core businesses and our newer initiatives are affected globally by federal, regional, provincial, state and other jurisdictional regulations, including those in the following significant regulatory areas:

• Consumer report data and consumer reporting agencies. Examples in the U.S. include: the Fair Credit
• Reporting Act (“FCRA”), the Fair and Accurate Credit Transactions Act (“FACTA”), which amends FCRA, and certain proposed regulations under FACTA, presently under consideration;
  
• Identity theft and loss of data. Examples include FACTA and other regulations modeled after the current California Security Breach Notification Act, that require consumer notification of security breach incidents and additional federal and state legislative enactments in this area;
  
• Fair and non-discriminatory lending practices, such as the Equal Credit Opportunity Act (“ECOA”);
  
• Privacy-related laws, including but not limited to the provisions of the Financial Services Modernization Act of 1999, also known as the Gramm Leach Bliley Act (“GLBA”), the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”) and similar state privacy laws;
  
• Extension of credit to consumers through the Electronic Fund Transfers Act, as well as non-governmental VISA and MasterCard electronic payment standards;
  
• Quasi-governmental regulations, such as Fannie Mae and Freddie Mac regulations for our mortgage services products;
  
• Insurance regulations related to our insurance products;
  
• The application or extension of consumer protection laws, including, state and federal laws governing the use of the Internet and telemarketing, and credit repair;
  
• Jurisdictional regulations applicable to international operations, including the European Union’s Privacy Directive; and
  
• Sarbanes-Oxley Act (“SOX”) regulations to verify internal process controls and require material event awareness and notification.

In making credit evaluations of consumers, performing fraud screening or user authentication, our customers are subject to requirements of multiple jurisdictions which may impose contradictory requirements. Privacy legislation such as GLBA or the European Union’s Privacy Directive may also affect the nature and extent of the products or services that we can provide to customers, as well as our ability to collect, monitor and disseminate information subject to privacy protection. In addition to existing regulation, changes in legislative, judicial, regulatory or consumer environments could harm our business, financial condition or results of operations. For example, the FACTA amendments to FCRA will result in new regulation. These regulations or the interpretation of these amendments could affect the demand for or profitability of some of our products, including scoring and consumer products. New regulations pertaining to financial institutions could cause them to pursue new strategies, reducing the demand for our products. In addition, legislative reforms of workers’ compensation laws that aim to simplify this area of regulation and curb abuses could diminish the need for, and the benefits provided by, certain of
our insurance solutions products and services.

(I wonder...has anyone ever sued Fair Isaac for a less than accurate score?)

So in reviewing all the information, Fair Isaac jumped into the “rent an AU trade line” on behalf of it’s clientele in the mortgage industry. They are not a regulatory agency and not in charge of credit scores. They are the company that right now most often has been hired to provide scoring software and analytics. They cannot violate federal law by not scoring an AU trade line. Changes to what an AU can be would have to be either litigated or amended by statute. VantageScore is the new scoring model developed and being sold by the Big Three that hopes to replace Fair Isaac. Whether Fair Isaac has a shot in hell of winning their lawsuit against the Big Three only time will tell. If they lose, I imagine that the Big Three will cancel their contracts with Fair Isaac and will no longer sell that scoring model as that would hurt their own scoring product and Fair Isaac will lose revenue!! So of course they are going to jump all over anything that may lower their status with one of their clients!!

I realize this is a long post but I felt it was important for y’all to know exactly what is going on with this. Your FICO score is just business to them. That’s it. It’s nothing personal and it should be just business for the consumer as well.

I was going to attach their 2006 Annual Report where I got all this info but it was too large a file. It's a pretty long read but has lots of info. You can download it here. Don't click the link if you are on dial-up as it's 5.31MB.

[Pale Rider]

You just gave me an idea for some new research. Pick any one of the CRA's. lets say Equifax. We know Equifax is a CRA, and they have reports on millions of people. FICO gets information from them, and then produces a score based on that information. Where did FICO get permissible purpose to see my report? Did they get the data after I requested my report, and then generated a score, giving them PP from my request? Was the score generated instantaneously by software based on my report at the time of my request? How did they get my data to use in their validation process? What data of mine do they have, and how did they get it?

[hannah]

Originally Posted by Pale Rider

You just gave me an idea for some new research. Pick any one of the CRA's. lets say Equifax. We know Equifax is a CRA, and they have reports on millions of people. FICO gets information from them, and then produces a score based on that information. Where did FICO get permissible purpose to see my report? Did they get the data after I requested my report, and then generated a score, giving them PP from my request? Was the score generated instantaneously by software based on my report at the time of my request? How did they get my data to use in their validation process? What data of mine do they have, and how did they get it?

Those are all good questions. I think the bigger question is the info they use on all us consumers that is not found on your credit reports. If it's not on your consumer report, not on LN or Choicepoint, how do you correct it if it's inaccurate?

[Pale Rider]

Originally Posted by hannah

I think the bigger question is the info they use on all us consumers that is not found on your credit reports.

And, are they using information that would violate ECOA? Such as race, age, gender, etc.

[Enigma]

Originally Posted by Pale Rider

You just gave me an idea for some new research. Pick any one of the CRA's. lets say Equifax. We know Equifax is a CRA, and they have reports on millions of people. FICO gets information from them, and then produces a score based on that information. Where did FICO get permissible purpose to see my report? Did they get the data after I requested my report, and then generated a score, giving them PP from my request? Was the score generated instantaneously by software based on my report at the time of my request? How did they get my data to use in their validation process? What data of mine do they have, and how did they get it?

They are a CRA - ScoreNet® Network

To date, the ScoreNet network connects:

* 1300+ collections and third party partners, including collection agencies, attorneys, data suppliers and service providers
* 60+ clients across financial services, telecom, utilities, retail, mortgage insurance and healthcare sectors
* 23 of the top 25 US financial service institutions
* 90 commercial databases and data aggregators across 55 companies
* Service offerings across consumer credit, account management and collections and recovery

I am writing for my report in the morning.

[Enigma]

From http://www.fairisaac.com/NR/rdonlyre...ansion_FAQ.pdf

See page 2 for Fair Isaac Credit Services Inc.

[Hedwig]

The ScoreNetwork only says they access data, so they don't maintain and probably wouldn't be a CRA. However, it sounds like Fair Isaac Credit Services DOES maintain files, so they would be a CRA. Make sure you write to the Credit Services Company.

[jlynn]

Originally Posted by hannah

So in reviewing all the information, Fair Isaac jumped into the “rent an AU trade line” on behalf of it’s clientele in the mortgage industry. They are not a regulatory agency and not in charge of credit scores. They are the company that right now most often has been hired to provide scoring software and analytics. They cannot violate federal law by not scoring an AU trade line.

I've been saying this all along. Fair Isaac can do anything they darn well want with their scoring model, including not scoring AU accounts. The liability for an AU not being scored will be placed on the creditor and or/resellers who choose to us FICO 08, and not score a spousal AU tradeline.

[Enigma]

Watch what happens when this goes into effect. Right now there are millions of persons that have their scores raised by being an AU. Once that data point is removed from the scoring model, millions of scores are going to drop. Once the creditors start doing the AR's, see the lower scores, the automated Universal Default Clause will kick in. Interest rates will rise and the complaints will start.

Congress will get an earfull and Fair isaac has seen nothing yet.

[jlynn]

I agree with you Enigma. And what's worse is that FI considers their models proprietary - I don't know anything about the legitimacy from a litigation standpoint, but basically - when consumers gets the adverse action letters, they are going to have to scrutinize and read between the lines. Its going to take a long time for the non-knowledgable group to catch on.

[Enigma]

Originally Posted by jlynn

I agree with you Enigma. And what's worse is that FI considers their models proprietary - I don't know anything about the legitimacy from a litigation standpoint, but basically - when consumers gets the adverse action letters, they are going to have to scrutinize and read between the lines. Its going to take a long time for the non-knowledgable group to catch on.

At my church I do budgeting/tax/credit classes and I've already started shouting form the mountain top. I am trying to get the word out. I've already called the papers and tv news, but so far they don't see a problem.

[hannah]

I was reading the complaint Fair Isaac filed against EQ, EX, and TU. It reads

Fair Isaac’s 300-850® FICO® Expansion score is calculated from nontraditional credit data (i.e., other credit related data that are usually not reported to Equifax, TransUnion or Experian, such as deposit account records and rental/utility payments).

which is similar to the language used in their annual report and in descriptions of their scoring model. How do they get access to "deposit account records and rental and utility payments"? This is private data and I don't recall having given my bank permission to report what I deposit except to governmental agencies? Isn't this in the Privacy Laws somewhere? Need to do more research but if this type of data is going to be used to calculate a credit score, how would you go about correcting any inaccurate information? With all the mistakes on credit reports from the Big Three, you know those inaccuracies probably exist.

[jlynn]

Hannah, go back to the ECOA. There is some language in there that talks about "considering alternative credit" if so requested. FHA loans at least, used to allow for alternative credit history in cases where there was no credit report for lack of standard history.

I knew about this when I was a RE Agent, and dealt with alot of brokers. I never delved into it, but it was my understanding that the applicant could submit this information themselves. (Such as letters from the electric company or landlord, that you have been a customer xxx amount of time, and always been on time).

It sounds like they have some sort of model for this, but I do not believe they crawl records as you are thinking. Of course it wouldn't surprise me.

[hannah]

Originally Posted by jlynn

It sounds like they have some sort of model for this, but I do not believe they crawl records as you are thinking. Of course it wouldn't surprise me.

Oh but they must have the data already or they wouldn't have a subsidiary for the data collected.

[jlynn]

Originally Posted by hannah

Oh but they must have the data already or they wouldn't have a subsidiary for the data collected.

Call a mortgage broker and ask them. I'm surrre you know someone. It could be something as simple as a non-traditional credit applicants signing for permission for someone to crawl their records. Also, we all know that there are "Landlord Credit Report" companies out there that consumers never think to ask for their report, from until they are denied an apt application.