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As a counter point. It's funny that on a site where the virtues of algorithms are extolled daily (Google, etc), one of the first widely (and very successful) u

As a counter point. It's funny that on a site where the virtues of algorithms are extolled daily (Google, etc), one of the first widely (and very successful) uses of the algorithm (the FICO/credit score) is decried. Companies use it because it works pretty well or well enough in most cases. Yeah there is some really bad data. However, half of that blame probably goes to the institutions reporting the data. (That's just a hunch) However, because I've worked in the finance industry for many years, I've made it a point to check my credit and try to keep it clean, because I know the credit bureaus lack the incentive to do it. I'm cursed because I have a common name and someone with the same name is very bad about paying his bills. I usually end up disputing something every other year or so.

pragmatic 16y ago
“If the loan criteria says you need to have a 700 credit score, and you have a 699, you don’t get the loan,” she said. “It makes me nuts.” Yes, it's called an algorithm. I'm guessing she doesn't understand that. "Their bottom line number is 620 — the company will buy mortgages only if the borrower has a credit score of 620 or above. Which means, given the current state of the mortgage market, that anyone with a score below 620 can’t get a mortgage. Even if that score is 619." The thing is regulators are looking at that number. There is a cut off there. Especially now that the regulators are going through the bank books with a fine toothed comb. Guess what, the worse you portfolio, the higher your capital requirements become. (Your margin of safety) A company I worked for bought a huge portfolio of debt. Turns out the average FICO was way off or out of date. Very bad thing. The original company had booked some really bad stuff and was one of many that went down in the waves of financial institution failures. Bad mortgages finally got them.
jbooth 16y ago
If Google sucks at their algorithm, I'm free to go use Bing, or not use internet search if I don't want to. If these credit companies suck at their algorithm, which they apparently do, I'm screwed. It doesn't help that they're most likely totally captured by the financial companies.

pragmatic 16y ago

“If the loan criteria says you need to have a 700 credit score, and you have a 699, you don’t get the loan,” she said. “It makes me nuts.” Yes, it's called an algorithm. I'm guessing she doesn't understand that. "Their bottom line number is 620 — the company will buy mortgages only if the borrower has a credit score of 620 or above. Which means, given the current state of the mortgage market, that anyone with a score below 620 can’t get a mortgage. Even if that score is 619." The thing is regulators are looking at that number. There is a cut off there. Especially now that the regulators are going through the bank books with a fine toothed comb. Guess what, the worse you portfolio, the higher your capital requirements become. (Your margin of safety) A company I worked for bought a huge portfolio of debt. Turns out the average FICO was way off or out of date. Very bad thing. The original company had booked some really bad stuff and was one of many that went down in the waves of financial institution failures. Bad mortgages finally got them.

jbooth 16y ago

If Google sucks at their algorithm, I'm free to go use Bing, or not use internet search if I don't want to. If these credit companies suck at their algorithm, which they apparently do, I'm screwed. It doesn't help that they're most likely totally captured by the financial companies.