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Lenders agree: FICO scores do NOT predict defaults

To cause the credit crisis, regulators not only condoned the use of FICO scores, but encouraged banks to use credit scores instead of common sense underwriting.

Fair Isaac dominates the credit scoring industry with its FICO scores. I knew that FICO scores were pure BS when they became mandatory for most mortgages in the mid 90s. As a California real estate broker I specialized in working with first-time buyers, young families and minorities. I made sure that my clients got prime loans and solid houses. All of a sudden, well qualified borrowers were DECLINED for good mortgages, usually because the credit bureaus refused to correct the credit reporting.

In 2/08, BusinessWeek published a 4-page article on FICO scores:

Credit Scores: Not-So-Magic Numbers

… While Fair Isaac was singing FICO’s praises to bankers and ratings agencies, the model was breaking down. According to a Fitch study, the average FICO score of borrowers who stopped making home-loan payments was 589 in 2001, compared with 620 for those who were paying on time—a 31-point difference that pointed to FICO’s predictive ability. …

By 2006, as subprime loan volume was surging, the gap had closed to just 10. …

My 1997 scans of mortgage credit reports document the irrelevance of a 10-point FICO score difference;

The FICO scores CHANGED up to 24 points from day to day with NO changes of credit data!

For over 10 years I have sent my complaints to politicians and regulators such as the FTC, OCC and the Federal Reserve Bank of Richmond. I even sued Fair Isaac and the regulators in 2003 for their REFUSAL to enforce the law. Since I’m not an attorney, they were dismissed and they continued to ignore me.

Tens of thousands have read my submissions to regulators in response to their requests for public comments on credit reporting and credit scoring. The regulators continued to ignore me.

I documented that FICO scores are based on entirely FICTITIOUS late payments. The FICO scoring formula is programmed to CREATE late payments NOT on reported on the credit reports to artificially LOWER the scores.

Of course Fair Isaac also IGNORED my 2/27/07 notice regarding this “software bug:”

2/26/07: Open Letter to Fair Isaac Regarding its Addition of FICTITIOUS Derogatory Data to Credit Reports and Sale of Defective myFICO Reports

While the main stream media interviewed me, they never published what I had to say.

Not until recently did I understand why legislators like Christopher Dodd, Carolyn Maloney, Maxine Waters and even Dennis Kucinich ignored me. Now I’m convinced that they’re either owned by the corporations and bankers or they are being threatened or blackmailed. Watch the videos on Martial Law.

I could spend months summarizing the many FICO scoring problems and bugs, documenting injustice after injustice and it wouldn’t make the slightest difference.

FICO scores exist for two reasons:

  • To redistribute assets from the poor and working people to the wealthy.
  • To create the credit crisis.

FICO scores were not the only reason for the credit crisis, but they are a major reason.

The credit crisis would not have happened if lenders had underwritten mortgage applications manually and without FICO scores as they did until the mid 90s.

  • Artificially LOW FICO scores enabled lenders to charge high rates and fees to many millions who deserved better.
  • Artificially HIGH FICO scores enabled lenders to ignore many reasons to decline millions of applications.

It is common knowledge that the credit data utilized to calculate the FICO scores is incorrect and incomplete. The credit bureaus implemented procedures to maximize INACCURACY of the data they report.

When Fannie Mae and Freddie Mac started to require minimum FICO scores, I got out of the mortgage business. I refused to force my clients into subprime mortgages.

I became a credit scoring specialist and I can guarantee a substantial increase in FICO scores for clients with money.

It does not matter how many charge-offs and collections are on the credit reports, with enough cash (or credit) you can essentially buy high FICO scores. I’ve had clients with FICO scores of over 720 only a year after the bankruptcy filing.

Notably, I do NOTHING illegal.

As long as clients are willing and able to settle collections and/or to add positive credit accounts with long account history, FICO scores above 700 are not at all unusual. As the BusinessWeek article describes, FICO scores are easily manipulated. All it takes is money and sometimes the willingness to file lawsuits against credit bureaus who refuse to report accurately.

The regulators and legislators KNOW that FICO scores are a 100% fraud.

The regulators are controlled by the legislators and by the administration. Bush severely reduced and even eliminated enforcement of consumer protection laws.

The legislators are too corrupt or scared to finally prohibit credit scoring. They have no conscience and/or no guts or they don’t care how many millions of Americans lose their homes and how many commit suicide.

Every plan to stop foreclosures is designed to help the BANKS minimize losses.

If you don’t understand WHY things suck as they do, please watch the free online documentary The Money Masters.

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