Veda Credit Scores and American Express Applications (esp Plat Charge)

[blueythecat]

I wonder what it is about the platinum charge card that's so negative to our credit scores. After all, it's a charge card, must be paid off each month and isn't unlimited credit. So much so in my experience my mortgage broker has said in the past banks generally ignore charge cards when calculating your servicing. For home loans for instance.

That is an interesting question. I guess the credit scoring companies see it as a greater risk for some reason, even if the banks don't.

 

[michaelangelo]

73 point hit for a Velocity Platinum over here! First application in well over 6 months too. Ouch.

 

[blueythecat]

So I successfully applied for the AMEX Velocity Platinum last month to take advantage of the bonanza of bonus points AMEX are offering in July and August. I thought there might be a chance that it wouldn't go as smoothly as normal, with my credit file having a decent smattering of new credit card applications over the last year and a bit (nothing too severe though).

To my delight there were no problems, my application was approved instantly - as has been my universal experience with AMEX applications when using a referral link and the card arrived less than a week later. There was no request for proof of income or any documentation, which again has been my universal experience when applying through a referral link.

Even though my application was almost a month ago, and my scores have been updated, as you'll see below I don't think this application has fully filtered through to my Veda score (or it is a very interesting and unexpected result if it has).

Credit Scores:
Veda Credit Score: 671 (up 8 since before the application)
Experian Credit Score: 550 (down 46 since before the application)
Credit Card applications in last 6 mths: 1
Credit Card applications in last 12 mths: 3
Credit Card applications in last 5 yrs: 10
Other credit applications 6 mths: 0
Other credit applications 12 mths: 0
Other credit applications 5 yrs: 0

Applying for the AMEX Velocity Platinum had less of an impact on my credit scores than applying for the Platinum Charge and around the same as when I applied for the Platinum Edge - although perhaps the hit to my Veda score is still to come. I'll keep an eye on my scores over the next few months and post back their recovery, or otherwise for anyone that is interested. I also have my eye on the NAB Velocity points offer that expires in a couple of months, very tempting....

Hopefully this is helpful for anyone still interested in dipping their toes in the AMEX water before the current round of bonus point offers expire.

As usual, credit scores are only one aspect of what a lender or credit provider takes into account when assessing applications and should be considered the be all and end all when applying for credit. Tracking it does make an interesting sport though!

 

[Pleb Status]

I have just looked up my Veda Score to see the affect of my recent spate of three CC applications (and one cancellation) in the past six weeks and it is now looking very worse for wear. It will be interesting to see how it recovers over the next few months.

Now being rated as 'Average', Veda say that it is 'likely' that I will default in the next 12 months. As they are only privy to a small part of someone's overall financial position, that is a very big call to make. Also, depending on what effective limit you place on the Platinum Charge, my overall combined credit limit has not really changed due to these applications (and cancellations).

I would actually argue that my risk of default has actually decreased as my assets, income and overall position have been verified (by NAB, Amex did not check) to some extent and credit was provided accordingly. I would be more wary of someone who has not made any credit applications in a long time as they could have had changes in circumstances that are not documented (lost job etc).

As an aside, I thought it was interesting that the junk mail I received noted that the average Veda Score is 771.

 

[nightelves]

Yeah my Veda score is sitting on average as well. How were you able to check your score? Did you have to pay for the subscription. It's also funny to see that my credit limit is $0 given that I have the platinum charge and the Platinum Jetstar credit card. Tempted to apply for the Platinum Velocity but I'm not sure if my application will get approve by Amex. Does any know when Veda scores recover?

 

[burmans]

These credit reporting agencies....will we ever understand their logic? LoL

Well, not to put too fine a point on it, that's half the point. Plenty of evidence that when people understand the logic they manipulate it. That (along with poor verification) was essentially what the underlying cause of the GFC was, the brokers knew what the logic was, they manipulated it, no-one checked and whammo.

 

[burmans]

After all, it's a charge card, must be paid off each month

You've said it yourself, it MUST be paid IN FULL every month. All other debt we usually only have to pay a small percentage, so this takes priority and drastically reduces your capacity to pay other loans.

 

[MikeeB]

You can check your veda score at https://www.getcreditscore.com.au/ whenever you like.

My Veda score was only 309 as of June 2015, but got approved for a Westpac Altitude Black with $15000 limit at the time! Go figure!? After that I didn't apply for any more cards until June this year when I couldn't resist the Platinum Charge and it's massive bonus. The Plat charge application did not affect my Veda score at all, as Amex only appeared to make an enquiry with experia, which you can check at https://www.creditsavvy.com.au/. Now 13 months on from the low score of 309 it has recovered back up to just inside what Veda considers the 'good' area at 638.

I guess it depends on the lender how seriously they look at your Veda score, I was absolutely gobsmacked at the time when Westpac approved me for a Black card when Veda was considering me such an extreme risk. In reality, I had been with my current employer for seven years, had 40k plus in credit from other providers and have never defaulted on any payments. It was all because of my high amount of credit enquiries, which as we all know don't always mean successful applications for credit.

At the end of the day you just don't really know how much of a weighting different credit provider put on each aspect of your credit file. Clearly for Westpac at least, no defaults and a good solid employment history are a lot more valuable than a number from Veda.

 

[albyd]

Burmans, your thesis makes sense to me - particularly from the perspective of a credit bureau who's system is trying to hold itself out as a reliable indicator of a borrower's likelihood to default. I suspect this difference in methodology between banks and (we're implying) Veda will iron itself out over time - particularly as more lenders start putting more weight on the Bureau scores as their databases become more information rich (more data as opposed to "negative" events like applications or defaults which is all the data they've collected thus far).

I think the banks (at least in my applications so far) have put a Zero limit next to charge cards might be that in addition to having to pay them off each month, they operate on a shadow limit basis so that past spending patterns determine what we can spend. i.e. someone who consistently spend $3K/month might not be able to put through a $50K charge without prepaying it (since no pre-set limit doesn't mean unlimited credit). Where someone with consistently high spend has a sudden negative change in circumstances before their payment history ha a chance to reflect it, might have a problem (e.g. $50K spend month but suddenly unemployed and destitute - a dramatic example I'll admit).

 

[nightelves]

You can check your veda score at https://www.getcreditscore.com.au/ whenever you like.

My Veda score was only 309 as of June 2015, but got approved for a Westpac Altitude Black with $15000 limit at the time! Go figure!? After that I didn't apply for any more cards until June this year when I couldn't resist the Platinum Charge and it's massive bonus. The Plat charge application did not affect my Veda score at all, as Amex only appeared to make an enquiry with experia, which you can check at https://www.creditsavvy.com.au/. Now 13 months on from the low score of 309 it has recovered back up to just inside what Veda considers the 'good' area at 638.

I guess it depends on the lender how seriously they look at your Veda score, I was absolutely gobsmacked at the time when Westpac approved me for a Black card when Veda was considering me such an extreme risk. In reality, I had been with my current employer for seven years, had 40k plus in credit from other providers and have never defaulted on any payments. It was all because of my high amount of credit enquiries, which as we all know don't always mean successful applications for credit.

At the end of the day you just don't really know how much of a weighting different credit provider put on each aspect of your credit file. Clearly for Westpac at least, no defaults and a good solid employment history are a lot more valuable than a number from Veda.

Yeah that is strange because I applied for both Westpac credit card and got declined even though I had a score of 600+ at the time. Their response was a general we based on decision partially or wholly on credit score even though I have never had a default and being with my employer for more than 8 years. Hence why i'm a bit hesitant to apply for other credit card given there's so many tempting bonus points signup going around.

 

[MikeeB]

Are you a current Westpac customer? I am/was at the time, maybe that's what got me over the line?

 

[nightelves]

Are you a current Westpac customer? I am/was at the time, maybe that's what got me over the line?

Yeap was an existing Westpac customer so I could get the fees waived for the Westpac Platinum card with the 40k Qantas points. After I got declined I closed my account.

 

[Pleb Status]

Are these credit scores really just a way to make the likes of Veda et al relevant (to make money for themselves)? Without all the information, their opinion is actually worthless. I believe that the banks currently think that as well.

Realistically, everyone should have a perfect credit score until they miss a payment etc. This is how it used to work and the Australian financial system is still in one piece.

I would actually go a far as banning credit scores as they really serve no purpose at all (now or in the future) except for the rating agencies profitability.

 

[burmans]

Burmans, your thesis makes sense to me - particularly from the perspective of a credit bureau who's system is trying to hold itself out as a reliable indicator of a borrower's likelihood to default. I suspect this difference in methodology between banks and (we're implying) Veda will iron itself out over time - particularly as more lenders start putting more weight on the Bureau scores as their databases become more information rich (more data as opposed to "negative" events like applications or defaults which is all the data they've collected thus far).

I think the banks (at least in my applications so far) have put a Zero limit next to charge cards might be that in addition to having to pay them off each month, they operate on a shadow limit basis so that past spending patterns determine what we can spend. i.e. someone who consistently spend $3K/month might not be able to put through a $50K charge without prepaying it (since no pre-set limit doesn't mean unlimited credit). Where someone with consistently high spend has a sudden negative change in circumstances before their payment history ha a chance to reflect it, might have a problem (e.g. $50K spend month but suddenly unemployed and destitute - a dramatic example I'll admit).

Absolutely I think this will even itself over time. What I think many people don't realise about credit reporting is the time they actually spend on modelling. To a degree they dont care about the why of events, i.e. they don't necessarily try and explain why charge cards have a negative impact, they just have the stats which show they do.

I'm not actually convinced the methodology is that different between bureaus, what is different is the volume and quality of data. If you don't have all the information about either someone (or the population as a whole) or that information is out of date then you wont come to the same conclusions even with the same base model. As an aggregate also your model is affected by the totality of information you have, i.e. the more information the more likely your model is to be correct.

Typical though while individual data is incorrect, there is a reversion to the mean across a population, i.e. it more likely an individual data is wrong than the model (based on everyone's) is.

I'm not specifically sure what the banks and bureau have done with charge cards, what I am sure though is that they are pretty sure that in the aggregate they aren't that positive for your credit rating.

 

[nightelves]

Does anyone know if waiting for a refinance for a home loan to go through affrcts your credit card application? Would have thought once you start the refinance process that it already gets recorded in your credit file and your Veda score adjust accordingly. Would be interested to hear from people's experiences.

 

[andye]

Does anyone know if waiting for a refinance for a home loan to go through affrcts your credit card application? Would have thought once you start the refinance process that it already gets recorded in your credit file and your Veda score adjust accordingly. Would be interested to hear from people's experiences.

Shouldn't worsen the score once the application hit has happened
Sometimes home loan applications improves it as it is seen as a good type of credit
I cant think of a credit card application form I've completed where you would have to disclose the forthcoming loan

 

[get me outta here]

There are a couple of links here to look up a credit score. How 'reputable' are they when say compared to Veda, which I already have access to?

 

[burmans]

There are a couple of links here to look up a credit score. How 'reputable' are they when say compared to Veda, which I already have access to?

While I don't completely agree with Pleb Status above, I agree with him that the value of a score is totally driven by the amount and accuracy of the data going into that score. Until we have comprehensive credit reporting information from at least the major banks going in then even the value of Veda's score is questionable. I don't agree with Pleb Status's view its worthless, some credit providers ARE using that score but equally many aren't.

Other bureaus traditionally have less information, in recent times this appears to have changed slightly. Information seems to be appearing in Experian that wasn't previously being provided, though I do note there appears to be a lag.

My Veda score and Experian score are not vastly different, but they are different. For now Veda is probably slightly ahead in terms of amount and accuracy of data, but it's worth noting that the big banks have a stake in Experian. They clearly want it to succeed so it's likely they will support their attempts to get broadly equivalent data so there is completion, their motivation is to use this leverage to drive credit bureau pricing down.

 

[get me outta here]

Thanks for that insight, I may check out those other sites as well as my Veda score.

While I don't completely agree with Pleb Status above, I agree with him that the value of a score is totally driven by the amount and accuracy of the data going into that score. Until we have comprehensive credit reporting information from at least the major banks going in then even the value of Veda's score is questionable. I don't agree with Pleb Status's view its worthless, some credit providers ARE using that score but equally many aren't.

Other bureaus traditionally have less information, in recent times this appears to have changed slightly. Information seems to be appearing in Experian that wasn't previously being provided, though I do note there appears to be a lag.

My Veda score and Experian score are not vastly different, but they are different. For now Veda is probably slightly ahead in terms of amount and accuracy of data, but it's worth noting that the big banks have a stake in Experian. They clearly want it to succeed so it's likely they will support their attempts to get broadly equivalent data so there is completion, their motivation is to use this leverage to drive credit bureau pricing down.

 

[andye]

Thanks for that insight, I may check out those other sites as well as my Veda score.

FWIW, My Experian score is 200 points higher than my Veda. Veda has all my credit applications, Experian about half

I agree banks must get some value or they wouldn't pay for the scores. However, you can have a lousy score and be in a great financial position, in which case many lenders will issue a card