Fair Isaac, Is It Really Fair?

August 1, 2011 by · 1 Comment 

Fair Isaac: Fair Or Unfair? A Reprise By Bill Roberts 

I originally wrote this three years ago. Nothing much has changed. Nothing much for the better that is. A few bad things have happened. Lenders are now requiring a FICO score to get an FHA loan, and they are making these loans subject to a tier system which requires a larger down payment for the bottom tier. This is counter-productive.  The people in the greatest need for FHA financing are finding it to be more allusive than ever. So let’s look at this situation:

The Fair Isaac company rates everybody’s credit.

They do it for the banks and mortgage companies. Not for us!

It is called your FICO score. FICO stands for Fair Isaac COrporation.

Because of the turmoil in our economy many people are seeing their credit scores plummet.

Is that fair?

The banks can’t manage their own affairs. A lot of them are BANKRUPT. Many more are in big trouble. They aren’t credit worthy yet they have gotten over a TRILLION DOLLARS of credit from us. The U.S. Government (that’s us) has bailed them out. And they want more.

It is time for them (the banks) to ease up on credit requirements to get things going again.

Who are they to demand better credit from us in order to borrow money than they themselves have? Their credit stinks.

Such Arrogance

It is time that we demand Fair Isaac to shut down FICO.

If we are going to “forgive and forget” that the banks are not credit worthy, then they should do the same for us.

Our economy needs credit in order to function. We need to be able to buy cars, refrigerators, and houses. We need credit. We all need credit, not just those with 750 credit scores.

Those arrogant bastards will only lend to you if your credit is unblemished even though they themselves don’t have unblemished credit.

America needs fairness in credit. We don’t need (or want) Fair Isaac.

Our credit mess wasn’t caused by people buying houses without a good credit score.

Our credit mess is the result of our financial institutions behaving very badly and not taking into account what would happen if real estate prices fell.

Well, real estate prices did fall, and as they fell the housing speculators (the flippers) couldn’t maintain their investments. They needed prices to go up in order for them to get back their purchase price, their holding costs, their transactions costs, and everything else that they paid.

When prices went down they couldn’t get their money back. They bailed out of the market. Prices went down some more.

People who had bought on the upswing found themselves UPSIDE DOWN. They owed more than their house was worth.

As their adjustable rate mortgages (ARMs) reset or recast they found themselves unable (or unwilling) to make their payments. So they bailed out of their houses too.

Foreclosures were rampant. Prices were in FREE FALL.

Everybody has been affected by this situation.

Our economy requires a healthy housing market. It can generate many jobs across the entire spectrum of our economy from home builders (all the trades) to transportation, to all the manufacturers of all components of home building and furnishing, to the manufacturers of automobiles and other consumer goods. A healthy housing market puts many people back work.

Get rid of FICO. Recover the economy. Everybody wins.

About William

Bill has been a Licensed Real Estate Broker in Californnia since 1975. He has a degree (BS) in Business Management (Finance) from San Jose State University (1970). He is married and lives with his wife in San Diego. Bill's interests include sailing, travelling, economics, gardening, Fox Business Channel, old movies. All in no particular order. Oh yeah, and cooking too.


One Response to “Fair Isaac, Is It Really Fair?”
  1. Grill Report says:

    Nice to read your blog