The Death of the FICO System
The past two to three years have been the most devastating years, economically, for our country, the U.
S.
A.
in the past 100 years- that is, since, the GREAT DEPRESSION.
And, I would submit to the reader- it has been the worst of all times.
That is because we are now involved with an extremely complicated set of equations- huge negative asset values, low employment, and, at the heart of it all- is the credit system- the FICO score.
History: just a few years ago- back in 2002-2007, one could get a mortgage simply by having a good FICO score- that is- in the high 600's, to the mid-700's.
You have to realize- people- the entire country, live by the FICO score (which was INVENTED in the 1960'd by two people).
We glorified the FICO system- and we said that, if a person had a certain score- they could get a mortgage- possibly of several hundreds of thousands of dollars- if not millions.
That's right- the entire system is built on a number- a SCORE- and we judge everyone by it- and, what did it get us?- The total breakdown of civilization as we knew it- nothing less!! This is not being radical at all- it is being CONSERVATIVE- that is, judging the results by the actions that were put into place.
Creeping into the system now, is the slow realization that there may well be OTHER parameters that matter- like, did a person just lose their job? Was there a complete breakdown in the real estate values in the mortgagor's geographic area? Was there a total or significant loss of employment in the nation at the time? Major credit card lenders are beginning to try to go deeper than just a cursory analysis/use of the FICO score-some major lenders are starting to issue cards to people with lesser scores- according to the NYTIMES (page 1, Dec, 13, 2010).
The simple fact is that millions of borrowers were allowed to get mortgages based solely on a number- a FICO score.
And, now, millions of borrowers are being dissed- that is, being not-allowed to get mortages or other loans, based once again on a ridiculously absurd system- the FICO system.
How can anyone possibly make believe that he or she ( or "it") can quantify human behavior enough to put a label- a number score- on his or her credit behavior, when, we cannot even understand what makes a cell metastasize? I use that metaphor only to show the terrible limits of our knowledge- and this lack of knowledge extends both to the "hard" sciences as well as to the humanities.
Or.
to put it another way, we are not as powerful as we think/thought.
In summary: The FICO system is a horrible relic of another time- and, it will not serve our country well in the future- it should be abolished, or, at best, it should be but one part of the calculus used to determine a person's credit worthiness.
It is an invention and should serve man- NOT the other way around!
S.
A.
in the past 100 years- that is, since, the GREAT DEPRESSION.
And, I would submit to the reader- it has been the worst of all times.
That is because we are now involved with an extremely complicated set of equations- huge negative asset values, low employment, and, at the heart of it all- is the credit system- the FICO score.
History: just a few years ago- back in 2002-2007, one could get a mortgage simply by having a good FICO score- that is- in the high 600's, to the mid-700's.
You have to realize- people- the entire country, live by the FICO score (which was INVENTED in the 1960'd by two people).
We glorified the FICO system- and we said that, if a person had a certain score- they could get a mortgage- possibly of several hundreds of thousands of dollars- if not millions.
That's right- the entire system is built on a number- a SCORE- and we judge everyone by it- and, what did it get us?- The total breakdown of civilization as we knew it- nothing less!! This is not being radical at all- it is being CONSERVATIVE- that is, judging the results by the actions that were put into place.
Creeping into the system now, is the slow realization that there may well be OTHER parameters that matter- like, did a person just lose their job? Was there a complete breakdown in the real estate values in the mortgagor's geographic area? Was there a total or significant loss of employment in the nation at the time? Major credit card lenders are beginning to try to go deeper than just a cursory analysis/use of the FICO score-some major lenders are starting to issue cards to people with lesser scores- according to the NYTIMES (page 1, Dec, 13, 2010).
The simple fact is that millions of borrowers were allowed to get mortgages based solely on a number- a FICO score.
And, now, millions of borrowers are being dissed- that is, being not-allowed to get mortages or other loans, based once again on a ridiculously absurd system- the FICO system.
How can anyone possibly make believe that he or she ( or "it") can quantify human behavior enough to put a label- a number score- on his or her credit behavior, when, we cannot even understand what makes a cell metastasize? I use that metaphor only to show the terrible limits of our knowledge- and this lack of knowledge extends both to the "hard" sciences as well as to the humanities.
Or.
to put it another way, we are not as powerful as we think/thought.
In summary: The FICO system is a horrible relic of another time- and, it will not serve our country well in the future- it should be abolished, or, at best, it should be but one part of the calculus used to determine a person's credit worthiness.
It is an invention and should serve man- NOT the other way around!
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