CC churning - equifax scores

[burmans]

• AFAIK, comprehensive credit reporting has delivered no benefits to consumers yet i.e. there seem to be no positive impacts to your score by having an account open that you pay off regularly. But, the banks now have more options to reject you on the basis of (they see the total reported current credit limit but not utilisation, and they can see if you only keep accounts only open for short periods of time).

All of this to say, from what I've gathered, having accounts open "to prove you're creditworthy" seems to be a myth in AU.

I'm one of those people who think giving the banks enough information to stop them lending to people who cant afford it IS actually good for the consumer.

On your last point, not sure what you mean by proving credit worthiness but length of credit history and the last two years repayment history are taken unto account by lenders. As a general rule people who have had loans longer are a better credit risk (they have proven ability to pay off loans) but they really look closest at recent repayment history, i.e. if you were paying on time most of last two years but recently have dropped behind its a reasonably strong indicator of financial stress. Not 100% but a good indicator.

 

[exceladdict]

I'm one of those people who think giving the banks enough information to stop them lending to people who cant afford it IS actually good for the consumer.

On your last point, not sure what you mean by proving credit worthiness but length of credit history and the last two years repayment history are taken unto account by lenders. As a general rule people who have had loans longer are a better credit risk (they have proven ability to pay off loans) but they really look closest at recent repayment history, i.e. if you were paying on time most of last two years but recently have dropped behind its a reasonably strong indicator of financial stress. Not 100% but a good indicator.

Ref inappropriate lending - I agree with you, but I understand how I made that sound. My point was more, for people who churn / utilise credit for its secondary benefits (but not irresponsibly), the additional information advantages banks but not consumers. Further, there are cases where it takes banks some time to mark an account as 'closed', which in turn complicates the consumers' ability to open further credit.

The last point is more about what I perceive to be an urban myth that 'getting a credit card when you're young, and paying it off, helps your credit score'. In my experience, having credit accounts with perfect repayment history drop off my credit file has caused my credit score to increase. Of course, other factors could be at play; I was more chiming in for our ex-pat friend on the topic that while holding cards long term (for the sake of having accounts open) might improve your score in the US, I haven't seen any evidence that it is the case in AU. YMMV.

As others have said, the combined open limit detracts from your ability to open further cards (as it should, from a responsible lending perspective).

 

[GSP]

I may be wrong as I (and I don't think many others) have any evidence of this but in addition to opening CC's and the associated enquiries, closed CC's that have not had a long history adversely affect your credit score.

My only observation was a few different occasions after little activity and thus score change on my file other than the monthly repayment was on time I then closed a card down in prep for a new one and my score went down. Perhaps there was something else at play but whatever that may have been was not obvious to me.

 

[sudoer]

Following an algorithm change by Equifax last month, it seems churning now helps your score rather than hinders. I went from high 600s last month to low 900s this month...

 

[BillytheFIsh]

Following an algorithm change by Equifax last month, it seems churning now helps your score rather than hinders. I went from high 600s last month to low 900s this month...

Hilarious. I'll have to see what happens to mine when it updates next week.

Further confirmation if anyone actually needed it that the number is an entirely made up marketing device which no lender would look at or take seriously.

 

[sudoer]

Yep, although I'm not complaining. This is great news ...

More info here: Your new credit score

The benefit for you is that, previously, credit scores were calculated using mainly negative credit behaviours, such as defaults and arrears.

With CCR, more positive data, such as paying your debt on time, using reputable credit providers, and avoiding short-term or unsecured loans, can be used to build your credit score.

This additional information will have an impact on your score, positive or negative. Adverse or negative factors will drive down your score, but positive factors can help drive improvements to your score faster.

Also some interesting bits to pull out...

Factors that can influence your score positively​

• Keeping your loan and bill payments up to date
• Closing credit card accounts you don’t need
• Limiting the number of unsecured credit you have, such as personal loans
• Avoiding small, short term loans including buy now, pay later
• Applying for credit with larger banks and more reputable lenders

Factors that can influence your score negatively​

• Late payments of over 60 days
• Late payments of 30 days over several months
• Multiple loans and credit accounts with overdue payments
• Loans and credit accounts in arrears
• Several unsecured personal loans
• Payment defaults
• Regularly using short term loans like buy now, pay later services
• Multiple applications for loans or credit over a short time period
• A short credit history

Ratecity have also done an article on it: What is Equifax One Score, and how does it change credit scores?

 

[burmans]

Following an algorithm change by Equifax last month, it seems churning now helps your score rather than hinders. I went from high 600s last month to low 900s this month...

Although it would appear that the change of score WAS due to an algorithm change, rather than your particular attributes? So not really sure why you have attributed to churning rather than perhaps an increased weighting of positive behaviours, i.e. paying your repayments on time.

Edit: also I don't think pay now services are reporting to the credit bureaus are they, so unsure how this would affect. You cant score information you don't have.

 

[sudoer]

Although it would appear that the change of score WAS due to an algorithm change, rather than your particular attributes? So not really sure why you have attributed to churning rather than perhaps an increased weighting of positive behaviours, i.e. paying your repayments on time.

I said churning seems to help rather than hinder, and I believe it does so indirectly because the algorithm now factors in positive CCR data like on-time payments, applying for credit with larger banks, and closing credit cards - which are all typical churning traits. Churning creates far more of these positive events than a regular credit file might have. Based on what Equifax have publicly stated on the new algorithm, I expect this would lead to a higher score.

In the link I posted earlier, Equifax also stated that 'previously, credit scores were calculated using mainly negative credit behaviours' which from first hand experience included credit enquiries and new accounts. Those events now seem to be either offset by the positive data mentioned above, or not negatively factored at all (they weren't mentioned in the new algorithm factors)

rather than your particular attributes?

My particular attributes have not changed at all. I've never had a default or missed payment and have been consistently opening 4-5 cards per year for my entire visible credit history. I haven't changed employer, address, or taken out any unusual forms of credit recently. I also have no mortgage or personal loans. My Equifax score on Wisr hasn't yet updated - here's what it looked like previously.



So I can only come to one conclusion: the data on my file generated from churning is now looked upon more favourably, hence my score changing from 668 to 910.

Edit: also I don't think pay now services are reporting to the credit bureaus are they, so unsure how this would affect. You cant score information you don't have.

Zip Pay checks with Equifax and Illion: Will you run a credit check as part of my application?
Klarna 'may' perform a credit check: Does Klarna perform a credit check on me? | Klarna Australia
Latitude checks with Experion: How do I get a copy of my credit report?
Afterpay say they don't run checks: Is using Afterpay bad for my credit score?

But Afterpay's T&C has previously stated that they reserve the right to order a credit report, which could mean some people have Afterpay enquiries in their history. It wouldn't surprise me if regulation is brought in to force Afterpay to participate in CCR.

 

[burmans]

Zip Pay checks with Equifax and Illion: Will you run a credit check as part of my application?
Klarna 'may' perform a credit check: Does Klarna perform a credit check on me? | Klarna Australia
Latitude checks with Experion: How do I get a copy of my credit report?
Afterpay say they don't run checks: Is using Afterpay bad for my credit score?

But Afterpay's T&C has previously stated that they reserve the right to order a credit report, which could mean some people have Afterpay enquiries in their history. It wouldn't surprise me if regulation is brought in to force Afterpay to participate in CCR.

It wouldn't surprise me either if they were brought under CCR as it clearly is credit but they have always claimed they weren't credit providers and didn't have to comply. From memory AfterPay even advertised it as a reason to use them, that it wouldn't impact your credit report.

My point about your attributes isn't that anything has changed, if they have changed their scoring mechanism it's quite likely that virtually everyone's score will change, look on this thread early Jan 2018 about the massive changes in scores. It's also a little bit disingenuous of Experian to state that 'previously, credit scores were calculated using mainly negative credit behaviours'. Their site has actually said that or similar for years (around this time, Jan 2018) when their scoring last changed, i.e. they have included at least some of these positive behaviours in their score for some time, on time payments in particular and possibly closed accounts.

There are some changes, mainly the items you have highlighted but to me its more of an incremental change than the wholesale change they are suggesting.

 

[sudoer]

if they have changed their scoring mechanism it's quite likely that virtually everyone's score will change

Yes I absolutely agree and was suggesting that through all my posts.

I don't think that everyone's score will jump from the low-end of 'Good' to firmly in the 'Excellent' range like mine, but I think that credit files with a history of churning will probably see a significant jump in their score for the reasons mentioned in my last post.

to me its more of an incremental change than the wholesale change they are suggesting.

Equifax have completely wiped the credit history graphs so you can't compare at all with your previous score. I do think this is what they say it is but I understand your skepticism.

This new generation of credit scores is recalibrated and unrelated to the previous scores from Equifax. Due to the new information and methods used to calculate your score, comparing it to the old score is no longer appropriate or accurate. Your score history graph will therefore be progressively built with the new Equifax Score.

IIRC the 2018 changes were tweaks to take into account the new CCR data, but overall the algorithm used similar factoring and was supposed to be comparable with pre-CCR scores.

 

[burmans]

Well I can’t divulge exactly how I know this, but I can advise that one of the main reasons why what was then Veda was acquired by private equity was because they knew the impact of CCR would make their products more predictive of consumer risk and they had modelling to support this ( I can tell you this as this report was made public). This would then in turn mean they could sell those products for more and/or to more people.

Do you really think they would not then use this information for this purpose once available in early 2018? As I say I can’t really tell you how I know they did this but I do know it!

 

[GSP]

Following an algorithm change by Equifax last month, it seems churning now helps your score rather than hinders. I went from high 600s last month to low 900s this month...

I thought scores only change at the beginning of the month? Anyhow, mine has virtually changed and I have similar profile to you as listed, although I do churn a few more cards. I remain in the mid 600's.

 

[sudoer]

I thought scores only change at the beginning of the month?

Not sure if there are set dates when scores are recalculated on Equifax's end, but I receive a report on the 14th of each month. I believe free services (Wisr etc) can only pull a file once every 3 months.

If yours hasn't changed much and you're looking at a recent report I am extremely confused...

 

[burmans]

Scores change when either
A) data held changes
B) the algorithm changes

A tends to happen at the start of the month (the credit code requires updated data with a few business days each month) but can also change with new applications etc.

 

[GSP]

Not sure if there are set dates when scores are recalculated on Equifax's end, but I receive a report on the 14th of each month. I believe free services (Wisr etc) can only pull a file once every 3 months.

If yours hasn't changed much and you're looking at a recent report I am extremely confused...

I log in on the 1st or 2nd of each month and it is then it updates for the previous month. It went up by 11 points last month - I don't receive reports, just the monthly score from the portal which has bounced around the mid 600's each month for a quite a few years, so I don't appear to have benefited.

Illion's site also changes at the beginning of each month. CreditSavvy (Experian) for me tends to be in the first half of the month.

 

[andye]

Credit Savvy updates your viewable score on the same day each month-will vary depending on when you sign up. My understanding is that the score actually updates at each enquiry/5 year expiry/default/etc and that is what the enquirer can see when they request

 

[GSP]

I received an email from GetCreditScore saying the website has been overhauled, so I went and had a look and lo and behold I saw my credit score skyrocket, similar to the experience others have mentioned above. I looked at the history and all previous months are wiped.

 

[burmans]

I received an email from GetCreditScore saying the website has been overhauled, so I went and had a look and lo and behold I saw my credit score skyrocket, similar to the experience others have mentioned above. I looked at the history and all previous months are wiped.

If the algorithm has changed then you can’t compare apples to oranges!

 

[GSP]

If the algorithm has changed then you can’t compare apples to oranges!

Agree, consistent with above posts.

 

[andye]

96 Point jump for me. I'm not a big churner maybe 2 applications a year. I do wonder if the thinking is to encourage applications from safe borrowers, ideally via their site