[Harmohit]

I wonder if open source software can play a role in this. Maybe we can have an open source algorithm for determining credit ratings and private companies only provide a secure database of ratings.

It will also offer the lay person insights into how the credit rating is exactly determined. They can know what is causing their rating to be less than desired and take appropriate action, instead of watching a random youtube video titled "5 ways to quickly improve your credit score".

[akira2501]

> and take appropriate action

Presumably the reason they have a lower score than desired is because they already failed to do this in one form or another.

> "5 ways to quickly improve your credit score".

Have no inquiries. Have no forced account closures or writeoffs. Have as much total open credit as you can without triggering the first two. Have at least one secured or unsecured installment loan open and then paid off every 5 years. Always pay your bills on time.

It's not quick, I suppose, but the recipe is already pretty well known.

[ourmandave]

Thinking of my last loan application, they ask you if you own or rent and how long you've been at that address. Also current job and income and how long there.

[Dalewyn]

Pretty much, yeah. A credit score is a descriptor of the risk of financial loss when lending the individual concerned some money.

So the only real way to grow and keep the score high is:

* Pay your credit card and loan statements when they are due (late payments imply you don't have money).

* Keep credit inquiries to the minimum necessary (an inquiry means you're asking for a loan, implying you don't have money).

* Don't max out your credit limits if possible (you're taking and maxing out lines of credit, implying you don't have money).

* Keep old credit cards open even if you don't use them, if it's practical (a longstanding open line of credit implies you have money).

* Keep doing all of the above for many years (a good credit score implies you have money and will pay back debts incurred).

There's no magic or mystery to it, it just takes a lot of time to grow and keep high because you're building and maintaining trust with banks. You know that old saying? Trust is built over years but destroyed in a second? Yeah.

[alistairSH]

Not only do banks and credit agencies provide a "recipe" for improving your score, most do so free of charge (for existing customers).

For example, I know my score swings by +/-30 points/month. I'm fairly confident that is due to the balance on my CCs varying when the score is calculated (there is nothing else about my financial situation changing - same house for a decade, same car loan for 5 years, no new credit lines/loans, etc). But, I pay the cards off every month, and the score always rebounds.

[jjav]

> I'm fairly confident that is due to the balance on my CCs varying when the score is calculated

Yes. It feels wrong that the current balance of credit cards is considered debt. It should only be considered debt once (if) you start paying interest on it. So if you pay it off fully every month, it shouldn't be seen as debt.

But whatever, they consider it debt so it can make the credit score swing up and down a lot. I see this every late summer when I pay my childs school bill for the upcoming year on a credit card. It is a very large amount so suddenly my credit utilization goes up and my credit score drops around ~70 points. Then a month later I pay it off and the credit score goes back up the same ~70 points.

[matwood]

Mine swings monthly for the same reason, though not as much. The report I get tells me why it swings ('used credit balance').

[astura]

FICO already tells you what goes into their scoring algorithm. It's not a mystery.

https://www.myfico.com/credit-education/whats-in-your-credit...

[isthatafact]

I was curious, so I checked that page and did not find the equation used to calculate the "score", only vague hints.

Is there a formula, spreadsheet, or code that people could use to verify their score? Or is it indeed a mystery?

[standardUser]

These agencies had far less regulation and transparency before Dodd–Frank in 2010.