12 Million Americans Are About To Get An Artificial Boost To Their FICO Scores

Zero Hedge ^ | 13 March 2017 | Tyler Durden

[Lorianne]

Back in August 2014, we reported that in what appeared a suspicious attempt to boost the pool of eligible, credit-worthy mortgage recipients, Fair Isaac, the company behind the crucial FICO score that determines every consumer's credit rating, "will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency. The San Jose, Calif., company also will give less weight to unpaid medical bills that are with a collection agency." In doing so, the company would "make it easier for tens of millions of Americans to get loans." Stated simply, the definition of the all important FICO score, the most important number at the base of every mortgage application, was set for an "adjustment" which would push it higher for millions of Americans

As the WSJ said at the time, the changes are expected to boost consumer lending, especially among borrowers shut out of the market or charged high interest rates because of their low scores. "It expands banks' ability to make loans for people who might not have qualified and to offer a lower price [for others]," said Nessa Feddis, senior vice president of consumer protection and payments at the American Bankers Association, a trade group." Perhaps the thinking went that if you a borrower has defaulted once, they had learned your lesson and will never do it again. Unfortunately, empirical studies have shown that that is not the case.

Now, nearly three years later, in the latest push to artificially boost FICO scores, the WSJ reports that "many tax liens and civil judgments soon will be removed from people’s credit reports, the latest in a series of moves to omit negative information from these financial scorecards. The development could help boost credit scores for millions of consumers, but could pose risks for lenders" as FICO scores remain the only widely accepted method of quantifying any individual American's credit risk, and determine how much consumers can borrow for a new house or car as well as determine their credit-card spending limit

SNIP

[ladyjane]

I thought this change had already taken place.

[sanjuanbob]

What a bunch of crap. We owned a business during the recession and saw our income plunge in half...we paid all of out bills and contractors before we ate. Our credit scores were never below 800 and we are proud to have earned those scores. We know people who walked from their mortgages in 2008 not because they couldn’t afford the payment, but because the house wasn’t worth what they owed on it. Today they’re crying the blues because the market came all the way back plus the same home is worth 25% more.
I also think that anyone who has been on public assistance should have it documented on their credit report.

[SkyDancer]

I found out that if I didn’t have a mortgage my FICO score was lower and if I did have a mortgage it was lower as well.

[CodeToad]

Welcome to the sub-prime mortgage mess, where taxpayers foot the bill for scumbags to get mortgages.

[Wuli]

Many people without scruples let their mortgages default only because on paper they were “under water” and even though, employment wise and income wise they had no other cause to do that. They bought their homes to “trade up” and thinking before too many years they’d be able to do so again. They merely did not have the scruples to wait through the real estate cycles until prices came back around again. Many got away with it with too little negative affect to their credit standing.

[TermLimitsforAll]

I am striving for a paid off home. Once that occurs I strive for my fico score to dwindle to nothing. Cash is king. If you can’t pay cash you can’t afford it.

Dave Ramsey Financial Peace University. It saved our life.

[dila813]

Good for me, I had stuff on there that shouldn’t have been and it has proved impossible to fix, like the company who did it was in bankruptcy and was liquidated.

Personally thought they did it to pump up their books because it wasn’t legit.

All they let me do was put a note on it.

[Lean-Right]

I wouldn’t say “everyone”
on public assistance. I
worked for 45 years, only
to become 100% disabled.
I’ve had to eat some
humble pie, and the wife
and I are barely keeping
our heads above living in
the street. Sadly, there
are those who abuse these
programs, and give my wife
and I (and those like us),
the proverbial black eye.

[Lean-Right]

P.S. My credit score was
800 before I got hurt...

[trebb]

Yep - I recently checked mine for giggles and it's 805. I haven't had a loan for over 10 years, own the house and paid cash for two current cars. IOW, the only "blot" on my credit score (other than not making regular payments to prove reliability) is that even though I pay the credit card in full each month, I carry a constant balance.

The reason is that we did what you did - took care of debts and obligations, then didn't ever overextend ourselves and never had any sort of default.

They are setting people up to be victims of their own stupidity like the "banks gotta lend money to deadbeats who can't pay because to not do so is racist and mean spirited" did. Then expect the taxpayers to pay for it - again.

[meyer]

And so the next housing bubble begins...