The Federal Reserve Bank of St. Louis reviews the ins and outs of the FICO credit score.
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How FICO credit scores work
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The Federal Reserve Bank of St. Louis reviews the ins and outs of the FICO credit score.
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I question the validity of a FICO score’s worth when the very institutions for which they serve are under investigation or have been found of questionable ethics by our courts and/or regulatory agencies. As of the Great Recession, FICO scores mean nothing to me. I look instead for pattern “red flags.”
Exactly so, Will.
As a life style shift, I look askance at those demanding FICO scores, including employers.
There are red flags by which they reveal themselves as untrustworthy:
1) demanding a Facebook password
2) demanding a FICO score
If they can’t face to face talk with their prospects, they don’t deserve good employees. If they don’t know how to hire, then passwords and third party rating scores won’t ever help them.
I am reminded of quasi-criminal organizations that aggregate personal data to sell for profit. They’ll gladly use any failure to their compliance demands in desperate ways to protect the dollar value of their database, which is all they’re selling.
Well the St. Louis Fed lives up to their mission. Applause please. Their video is a textbook explanation for the raison d’etra of banks, credit accounts, and well, the Federal Reserve. Sounds good doesn’t it? So logical, isn’t it?
Few people know that the Fair Isaacs Company (FICO stands for their name) got its start in making betting odds at the gambling tables of Monaco. They long since moved on to bigger gambling tables: selling their FICO scores to all those corporations who’d pay them steadily for their odds.
It’s what they didn’t say in the grade-school video that’s interesting. Like Coca Cola, their black box formula, which they refer to by their scientific-sounding “algorithms,” contains what no one outside of their tight cadre knows. We can’t tell you, they say, to insure no one games the system. Uh-huh.
We’ve heard stories, and who hasn’t, that their “algorithms” include down rating you for your buying history that they just might not approve of, or spending “habits” they can aggregate like an accusatory prosecutor. Remember, anything they can down-rate you for means more money for their clients, the banks who charge more can be more profitable, with interest rates for credit cards, mortgages, auto loans, and the list go on.
Language is highly important. “Agency” implies its original use which was a state sanctioned operative serving as an authorized agent of the state, an administrative unit of the government. Contemporary examples include The Central Intelligence Agency. BTW: You are a real estate agent because you are sanctioned by the state. Some Agencies just call themselves a Bureau. That the FICOs have been effective in getting the man in the street to refer to those blackbox-score-selling, gambling-odds-making companies as “the credit Agencies” is brilliant marketing. Hats off please!
Their effective surveillance tool? The credit card. You carry it everywhere. It reports back to FICO headquarters. You have it for 5 years or longer, that blackbox knows who you are, what you like, where you spend time, what you read, and in some cases with whom you spend your hours. Pay them late and they rap you on the knuckles. Rightfully so, I might add, since you signed up for their dance.
The real surprise is that the FICO’s of the world have been extremely successful in selling their blackbox scores to every private company, every money related entity, every government bureaucracy. Everyone. They’ve convinced prospective employers that you may be a bad person unless your FICO is XXX. Pretty soon, even God will demands your FICO score at the Gates, you loser.