Lenders agree: FICO scores caused the credit crisis
From a Business Week article from February:
Credit Scores: Not-So-Magic Numbers
The once-vaunted FICO credit scoring system is now being blamed for failing to flag risky home-loan borrowers. Will an overhaul be enough to appease angry lenders?
by Dean Foust and Aaron Pressman...
Now the credit markets are in disarray, and big mortgage players like HSBC (HBC), JPMorgan Chase (JPM), and Washington Mutual (WM) —perhaps opportunistically—are laying much of the blame at Fair Isaac’s feet, arguing that its score didn’t predict delinquencies as expected. (Meredith Whitney, an analyst at CIBC World Markets, called FICO scores “virtually meaningless” in a December note to clients.) Consumer advocates and state regulators are clamoring for Fair Isaac to disclose its formula. And credit-card providers are beginning to question the score, too. “So many people, I think incorrectly, looked at FICO as being the’ measure of risk,” Discover Financial Services (DFS) Chief Executive David W. Nelms told analysts in December.
Fair Isaac vigorously defends its product. “We don’t think FICO scores have caused or contributed to the subprime mortgage problem,” says CEO Mark N. Greene, a 12-year IBM (IBM) veteran who took the helm at Fair Isaac last February as its problems were becoming apparent. [emphasis added]
...
This must be the article a reader once mentioned in email, but I never had the link. Are there any updates?
I really hope the banks will sue Fair Isaac out of business.
There’s a lot about “credit doctors” in the article. It’s amazing how so many credit repair people engage in illegal activities. Apparently I’m still the only person who can analyze score factors and make recommendations to LEGALLY improve the scores.
I also seem to be the only person who documented that FICO 08 is nothing but a lot of hype and that Authorized User accounts are NOT ignored as Fair Isaac claims.
Maybe Fair Isaac hadn’t figured out yet that AU accounts are STILL rated for account history. It wouldn’t be the first time that I’ve documented a FICO scoring “bug.”
Fair Isaac programmers can’t even get the correct field labels on the myFICO reports! And that’s first year programming.
Please post or email any articles on possible legal action against Fair Isaac by the banks. FICO scores aren’t the only cause of the credit crisis, but they are a MAJOR cause.
Isn’t it too bad the regulators and legislators ignored and CONTINUE to ignore my research?
Nobody can claim that I didn’t try to prevent the credit crisis. I’ve done all I could do, I’ve given all I had.
EVERYBODY ignored me.
Posted by Christine on 10/11/2008 at 09:18 PM
Credit crisis deliberately caused by the regulators • 2003 Suit (appealed, Experian filed credit reports on PACER) • Fair Isaac - credit scoring fraudware • (2) Comments • Permalink
Christine:
Read your article, and I completely agree, and you are right on target with your assessment of the FICO 08 Program.
What a Joke, my own personal Experian True FICO went from 745-573 for (1) collection account for $149.00 this is a “143” point score drop over one small collection account and it didn’t even belong to me and was subsequently removed from my report in less than two weeks.
Since this time my credit is still excellent and my Experian Score since Jan-08 has gone from “573” to “663” in Feb-08 to “645” in
April-08 to “627” in Sept-08 to “625” in Oct-08.
All the while my credit has been maintained as it has always been and I’ve also reduced my utilization rate by 23% along the way.
All of this has happened in (1) year from 10-07 thru 10-08.
And no one has an answer, more importantly is the fact that I myself spent (25) years in banking myself and I can assure you, that what the average consumer has to deal with as far as the “CRA’s” are concerned in just mind boggling.
I myself spend probably “10-12” hrs per week just keeping up with whatever the bureau come up next.
Joseph, it doesn’t make any sense that your scores went only to 663 after the collection was deleted if it was 745 before the collection.
Did you compare your score factors?
