Posted by: John S Kiernan

Numerous websites, including CreditBoards.com, operate so-called credit-pulls databases. These forums include crowdsourced information about which credit bureaus different issuers check when evaluating applications, what credit scores are needed to obtain various credit cards and the spending limits people are approved for.

But such tools have a number of inherent flaws:

• Unvetted Users & Content: You don’t have to be a verified applicant or cardholder to contribute to these credit-pulls databases. As with all public online discussion forums, that means the “intel” they provide is fundamentally tainted by the possibility of a contributor’s dishonesty or biased point of view. The CreditBoards.com website, for instance, though well intentioned, does not specify a verification process for either the cardholder or the information a user supplies. Its Terms of Service in fact disclaims any responsibility for “the content of your messages, and the consequences of any such messages.”

• Underwriting Oversimplification: Credit-pulls database sites are supposed to help you predict your chances of credit-card approval. Instead, these tools send you on a wild-goose chase with the potential to cost you both time and money. That’s because the takeaways gleaned from the random collection of other consumers’ credit scores, application results and credit limits that these sites provide are more likely to foster false impressions and bad decisions than sound, money-saving choices.After all, do you honestly think that any group of individuals can reverse-engineer the secret sauce of some of the country’s most sophisticated lenders?

• Time Matters: The economic climate, the priorities and policies of financial institutions, and the financial performance of other consumers all evolve over time. So it’s entirely possible that the same applicant who got approved for a given account a year or two ago, for example, would be rejected today. And since the information on most so-called credit pulls-databases tends to be rather stale, misguided assumptions are bound to result due to the simple passage of time.

• No Two Lenders Are Created Equal: Each credit-card issuer takes a variety of variables into account for each applicant and prioritizes each element differently. So it’s not just a matter of having the same credit score or being in the same credit category (excellent, good, fair or bad) as someone else who got approved. You need to consider the type of credit score the lender used, for one thing, as well as the credit report it’s based on and the fact that multiple scores are commonly referenced.Even minute discrepancies in these underwriting ingredients can lead one lender to view your creditworthiness far differently than another. So the fate of your individual application is in the hands of the particular lender you’re working with at a given time.

There’s simply no way to get all of the information you need to make a truly accurate prediction from these credit-pulls databases. So why muddy the waters or lure yourself into a false sense of security?

A Better Approach

Given that the websites some people call “credit-pulls databases” are inefficient at best and dangerous at worst, you’re far better off allowing WalletHub’s sophisticated algorithms to identify the best offers that you can get approved for. Using data from your TransUnion credit report, we compare your current card’s terms to all other attainable offers in order to pinpoint the best savings opportunity. And when we find something worthwhile, we’ll notify you with a clear explanation of the potential upgrade, allowing you to quickly make a yes-or-no decision.

In other words, WalletHub cuts out the middle man, doing all of the legwork needed to find the best card for which you have a high likelihood of approval. Yes, we’re obviously biased when it comes to WalletHub’s superiority, but all we’re really saying is that it’s worth a shot. WalletHub is free, after all, and setting up an account takes only a fraction of the time you might otherwise spend hopelessly scouring a credit-pulls database.

Ask the Experts: Can You Trust a Credit-Pulls Database?

For some outside perspectives on the usefulness, or lack thereof, of a credit-pulls database, we asked some money-management professionals to share their thoughts on the following questions. Check out who they are and what they had to say, below.

1. Should consumers trust / rely on information from a so-called credit pulls database?
2. What are the biggest problems with making financial decisions based on anecdotal, crowdsourced info?
3. Is it possible for an individual to independently and accurately predict his or her odds of getting approved for a given credit card and receiving a certain spending limit? Is it worth trying?

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• Brenda Eichelberger Sr. Instructor II of Management and Finance in the School of Business Administration at Portland State University
• Travis Davidson Interim Chair & Assistant Professor in the Department of Finance and Charles M. Copeland Fellow at Ohio College of Business
• Edward Horwitz Mutual of Omaha Endowed Executive Director in Risk Management, Associate Professor of Practice in the Department of Economics and Finance & Director of the Center For Insurance and Risk Management in the Heider College of Business at Creighton University
• Sterling Raskie Lecturer of Finance in the Gies College of Business at the University of Illinois at Urbana-Champaign

Brenda Eichelberger Sr. Instructor II of Management and Finance in the School of Business Administration at Portland State University

Should consumers trust / rely on information from a so-called credit pulls database?

There are three large credit reporting companies (TransUnion, Experian, and Equifax). Equifax had a large data breach last year, so the short answer is no, you cannot really trust or rely on any databases for 100 percent security. That is why it is important to check your credit score on a regular basis. Many credit card providers will do this free of charge as a service to their customers, you can pay for an additional low-cost protection plan, and the FTC requires you have access to your credit score annually free of charge.

I recommend my students use "FTC, .gov, credit report" for searching on Google for the most recent links and information. They should read three articles and educate themselves about credit law, then pull their free score and review the numbers. Some reports share that as high as 30 percent of our credit reports have some errors. It is a good idea to correct these mistakes prior to needing to use your credit score, because it can take some time to make corrections. Also, it is very important to assure yourself that there has not been any incidences of identity theft or misuse.

What are the biggest problems with making financial decisions based on anecdotal, crowdsourced info?

Good question. I share with my students that "personal finance" is "personal." It really depends on your goals, needs, and specific situation. Just like online dating, each person has a very specific profile, and what works for one person (loves motorcycles and skydiving) does not work for another. Spend the time deciding who you are and what you want, and then find the best financial fit for your needs.

Is it possible for an individual to independently and accurately predict his or her odds of getting approved for a given credit card and receiving a certain spending limit? Is it worth trying?

The best way to predict your odds for approval of a credit card is to know your credit score. If you have no score or a very low credit score, than it’s possible that a secured card is the best way to build your credit. There are many, many credit cards out there. Do some research and find the card that best fits your needs and your current situation. If you do a bit of homework and self-refection, you will be most likely to use the right card for you. Credit scores are so important to your financial health and future borrowing that is it certainly worth the few hours for you to come up with a plan to meet your needs and increase your score.

Travis Davidson Interim Chair & Assistant Professor in the Department of Finance and Charles M. Copeland Fellow at Ohio College of Business

What are the biggest problems with making financial decisions based on anecdotal, crowdsourced info?

Clearly the risk is that the information is not accurate.

Is it possible for an individual to independently and accurately predict his or her odds of getting approved for a given credit card and receiving a certain spending limit? Is it worth trying?

Predicting the odds of approval is likely not worth an individual's time. Lenders have proprietary methods and models to approve credit. While we know the types of things that go into these models (payment history, current credit outstanding, percent of available credit being used, income, employment history, etc.) we don't know exactly how companies use the information to make a decision.

Edward Horwitz Mutual of Omaha Endowed Executive Director in Risk Management, Associate Professor of Practice in the Department of Economics and Finance & Director of the Center For Insurance and Risk Management in the Heider College of Business at Creighton University

Should consumers trust / rely on information from a so-called credit pulls database?

Credit pull databases use what’s known as a “soft credit pull.” Credit card companies and mortgage banks use “hard credit pulls” from the three bureaus (Experian, TransUnion, and Equifax). Therefore, the credit pull databases are directional at best, but can give a fast picture and alert you if something is lower than expected.

What are the biggest problems with making financial decisions based on anecdotal, crowdsourced info?

Again, its important to understand that credit card companies pull credit info from different sources and look at different scoring elements. If you are interested in obtaining a mortgage or refinancing, the crowdsourced info may not apply or just be flat our wrong. The same goes for buying a car or getting a new credit card. It’s best to know your credit score from the sources used by the type of credit you are seeking.

Is it possible for an individual to independently and accurately predict his or her odds of getting approved for a given credit card and receiving a certain spending limit? Is it worth trying?

If obtaining a certain card and a specific limit is a goal of yours, there are ways to use this information to your benefit. For example, if you know the credit card issuer is located in a certain state or uses a specific credit agency, you can narrow your focus to your score from that source to see what limit you might be eligible to receive. Likewise, if you know that one of the three scores you have is higher than the others, you can seek out cards that use that scoring bureau. A little time researching different cards, states, and credit agency scores can yield more focused and productive card search results.

Sterling Raskie Lecturer of Finance in the Gies College of Business at the University of Illinois at Urbana-Champaign

What are the biggest problems with making financial decisions based on anecdotal, crowdsourced info?

One of the biggest problems I see is that advice for the masses is not necessarily right for the individual. For example, I often hear that investors should expect 10-12 percent returns over the long run in their portfolios. This commentary is often given casually, confidently, and almost always omits the amount of risk required in order to achieve such returns. Additionally, investors then become "anchored" to the 10-12 percent and believe that this average is consistent every year -- when, in fact, it's an average that may or may not apply to them over the long term. In other words, they need to expect to lose (a lot) during that time horizon. This is because of the risk they must take in order to achieve such a high return.

Going along with anecdotal and crowdsourced advice, I feel many financial decisions are then taken into one's own hands as individuals go into "DIY" (do it yourself) mode and feel they don't need the help of an expert. While some basic financial decisions can be made without professional help and guidance, too often, mistakes are made that end up costing investors hundreds, if not thousands of dollars. Such decisions include estate planing, taxation, investment allocation, risk management, and portfolio withdrawal rates (to name a few). One way to think of this is to pose a question to individuals: Would they do their own dentistry? Would they perform their own surgery? Build their own house? Some folks will lose money, because they tried to save money by not seeking (and paying for) the help of an expert.

Granted, some individuals may have the skills and are qualified to do it themselves, but there are several individuals (myself included) that seek additional, professional advice on matters they know, just to make sure they aren't missing anything.

Image: erhui1979 / iStock.

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