Confessions of a Credit Score Modeler

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The Truth about Credit Scores, from a Credit Score Creator

The Truth about Credit Scores, from a Credit Score Creator

By: Ed DeShields, President of CE Analytics, Inc.

I am the inventor of a consumer credit score called the CE Score.  As you know, there are only a few credit score modelers in this important market that directly affects almost everyone who participates in our financial system.

The list of credit score modelers is small because it is very difficult to examine a list of trade records on a credit report against a longer list of risk scenarios and arrive at a single number that somehow summarizes the risk that a person will default on a loan or credit card.

Not everyone views this risk with the same ruler, and some people – even those who should know better – are quick to miss this point of credit scoring. While there are outliers in all credit scoring models, most have solid underlying logic on how their score represents your credit report data.

I don’t often write publically about our credit score, partly because of the rather monopolistic nature of our credit scoring industry and its critics, and partly because one brand or another might not actually matter if it (and you) really understand the “inside baseball” about risk. What does matter is that I built our system because I felt that the current credit score system was outdated; not because other companies weren’t smart enough. I greatly admire the scientific accomplishments of my colleagues in the business, but felt the market needed a more contemporary view of risk in our new financial era. Also, I don’t think it’s right that consumers continue to be denied the help they need to actually understand how their credit score works.

My other major motivation in investing the time and money to build a credit score was to make our credit score free. It makes no sense to me to make you pay for your credit score, much less hide how the score works with your credit report. Credit scores are important and affect your life in real ways, so it should be easily and regularly available to you – especially if you are considering a home loan, auto loan or credit card.

For those who want a deeper understanding of their credit score, we build market-leading technology inside of Quizzle, which we’ve called the “Credit Personal Trainer” or your “Credit Action Plan,” that helps guide you toward a better understanding of how your credit behavior translates into your credit score. While this particular tool is not free, it is the cheapest and only way to get a direct translation from the credit scoring model itself. The actions it suggests typically translate to any credit scoring model.

[Free Resource: Check your free credit report and score]

My dream for free credit scores for consumers was realized when I teamed up with the visionary team at to contribute to the first website that gives people their credit score for free – no catches, no trial subscriptions. Initially we were criticized for being so transparent about how a credit scoring model actually affects you. Many said we allowed you to game the system and that somehow your understanding of how you were being graded allowed you to obtain a loan under false pretenses, or to trick the score to artificially raise it. Of course, this silly objection is usually motivated by those who write about the subject and who are likely biased toward a particular credit score model. Lets face it; credit scores, religion and politics are most debated by those who know the least about them.

Credit score bias is one of the largest dangers to our financial system. You should be aware of this bias as you read material published by financial writers who are clearly one-sided in their brand preference. Innovation occurs in credit scoring just as it does for jet aircraft, the Internet or in the sciences. If the publishing industry demanded you read only one newspaper or a single website for your information, you would soon have that single-minded view of your world – the world as pontificated by a single source.

One of my favorite quotes is from Arthur Schopenhaure who said,

“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third is it accepted as being self-evident.”

Innovation ebbs and flows with the times. Since our credit score is among the newest designs in the market that has been thoroughly tested, we feel it has some important and meaningful improvements in the illustration and definition of credit risk. For example, your lender could be using a credit score that is five to 10 years older than the CE Credit Score and still calculates risk from a time we now recognize as having been an era of extreme financial irresponsibility. As evidence, one of our most important innovations is the use of the CE Score in the financial markets with Wall Street firms to re-examine how risk was originally underwritten on portfolios of loans that are now defaulting. Unfortunately, we now know how the underwriting logic of that era nearly brought down our financial system.

The CE Credit Score has thankfully survived the first two stages of Mr. Schopenhaure’s Theory in its market acceptance, largely due to the foresight and vision of and its sister company, Quicken Loans, who is among the most successful lenders on the planet because of innovation.

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