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Credit Contraction News: FICO Calculation Changes

perfectfireperfectfire
edited August 2007 in The Economy
Change in FICO Scoring System Could Affect Mortgage Loan Availability
Fair Isaac Corp. will be making major changes to the FICO scoring system. Those who are in the know say that the overhaul is a very big deal, and is likely to result in plummeting credit scores.

Wow, this really is a perfect storm of credit implosion!

Comments

  • upsciLLionupsciLLion
    I love this part:
    What Can Consumers Do?

    If you are an authorized user on someone else's account and want to maintain the benefit, the best thing you can do is become a joint account holder. This is the only loophole that will be left once the FICO model changes.

    If you disagree with overhaul, you can also sign one of the many petitions currently circling the web. An example of one such petition can be found at StopFICO.com.
    My eyes almost rolled out of their sockets when I read that. If you think it's unfair that FICO is trying to weed out fraudulent practices, here's who you can contact to voice your grievance! :roll:
  • Lake Hills RenterLake Hills Renter
    Funniest part is that they think Internet petitions have any impact whatsoever. :lol:
  • carlislematthewcarlislematthew
    "If you are an authorized user on someone else's account and want to maintain the benefit, the best thing you can do is become a joint account holder. This is the only loophole that will be left once the FICO model changes. "

    After they make this change (due to start in September) then this change as mentioned above WON'T BE a loophole any more. The thing about being a Joint Owner of a credit card is that you are jointly and separately liable for the debt. So, if the card doesn't get paid, then you're responsible too! There is no way that you should be allowed to get the benefit of the score boost of the credit without the risk of being liable for the debt.

    I can't believe that some people out there are annoyed about this change. Sure, it affects some spouses that don't have their own cards. Well, just call the bank, fill in a form, and become a joint owner. OR, before the changes are made apply for your own damn card and get it before your score drops in September.

    This particular change as mentioned above isn't as big of a deal as others are making it out to be.
  • perplexdperplexd
    Maybe if we started saving up for shit instead of buying everything on credit, we wouldn't care what credit rating agencies thought of us.

    Yes, I know they've made it inconvenient to live without debt and credit in today's world. I guess we should all just agree to the slaver's terms because it is so much easier..

    </rant>
  • rose-colored-coolaidrose-colored-coolaid
    Who made it inconvenient? Unless you are referring to getting an education or buying a home, I don't think it's all that difficult to live debt free. Here's a few easy steps that work for 'most' people (parents making minimum wage excluded)

    Buy a cheaper car than you really want.
    Eat out less frequently.
    Eat one vegetarian meal a week.
    Avoid addiction (tobacco, alcohol, coffee).
    Find a free or really cheap hobby (ideally one that involves physical activity)
    Save up for things you want, and only charge the things you need.

    If everyone in U.S. of A. followed these rules, the overall debt load would be substantially lower, which would be good for our economy.
  • perplexdperplexd
    Or buy a bike.

    As it is currently structured, however, it would be catastrophic for our economy.
    Who made it inconvenient?

    The bankers [credit card companies are just banks with a specialization, but all banks, not just those]. They like having all these debt slaves running around.

    We don't need capital formation on Wall Street to make bikes and houses and run local farms, right? We don't need Wall Street -- but Wall Street needs us pretty bad. They need us to buy things we can't afford or they have to go start a local farm and ride bikes everywhere they go.

    I sense that you want to say "it's our own fault" but there's more than that. It really is almost impossible to save up to buy a house outright for most people. That's not our fault. It's been set up that way from way back by people who had a lot to gain from setting it up that way. So if you ever want to own property, you will need a credit history. Not an accident.
  • rose-colored-coolaidrose-colored-coolaid
    Well, I am all for debt in the right circumstances. I already stated this, but debt for anything that produces increased income is just peachy. Borrowing for an education is peachy. So is borrowing for a home if your monthly payments will be lower than your rent (in some reasonable time frame). Likewise, borrowing to start a business can be excellent.

    So am I blaming people...yes and no. I don't blame the people who have had a few bad breaks, are working a service job for $8.00 an hour, and are trying to take care of a family. Those people are just going to be on the edge. On the other hand, we have people making six figures who are also living pay check to pay check. You can't tell me that people like that are being forced into debt. I don't know where I draw the blame line, but median household income in Seattle is over $60k, and it seems like most households making median income or better should not need generally need excessive debt.
  • explorerexplorer
    Agreed RCC. Save the debt for when it counts. If you have the discipline, you can also sit on Credit Cards for emergencies, and/or use them but pay off the balance each month - cash discipline. Having a line of credit at the bank, especially if you DON'T have it based upon any home equity, can do the same thing. Your minimum payments are much lower, when you need to pay the minimum.

    If you get into a tight spot, and you had the discipline to keep your credit excellent, it can save your bacon if you lose your job, need true emergency funds, since it can be an immediate source of funds. My only debt is a legacy from a job loss and underemployment during the recession of 2001-2004. It kept me fed and housed, and allowed for unexpected major dental work.

    I am still paying it off, but at indefinate term 0 interest, due to balance transfer offers, so I'm not in a hurry. It does not hurt my credit score to the point of less than prime, since I have a dozen cards of various types.

    I have the liquidity I am comfortable with. When it comes down to it, you need it, and a postive cash flow. Home Ec 101. Works for me.
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