I happened across this very interesting article about the ubiquitous FICO score and thought I'd pass it along to you. It's on a real estate site and was written by a mortgage and banking expert, but as he quite correctly points out, a FICO score affects people's lives to an astounding (perhaps even disturbing?) degree, far beyond the approval or denial of a loan. In fact, if you're starting a business, trying to rent an apartment or even applying for a job, chances are good someone's going to take a look at your FICO.
I especially like the irony inherent in Mr. Beranek's opening statement:
When I started in banking, I was taught to examine the financial statements, the business plan and then look the potential borrower straight in the eye. I could usually assess a good risk from a bad one. But, those days are gone.For better or worse, a credit decision now usually rests on what is supposed to be an objection and unemotional number. That number is [the] FICO credit score.
One wonders why we need loan officers at all. Just let the computers trade numbers.
By the way, if you think a "just good enough to get the loan" FICO score is fine, take a look at the section of this article that shows how your score can affect your interest rate--and the size of your payments--when you get a loan. It's a real eye-opener.
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