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It's quite amusing how the US focuses so strongly on the separation of powers, but US financial institutions rely so strongly on FICO scores as data points to d
by ValentineC 6y ago
It's quite amusing how the US focuses so strongly on the separation of powers, but US financial institutions rely so strongly on FICO scores as data points to determine whether to issue credit.
- tptacek 6y agoThose scores replaced a far worse system.
- Godel_unicode 6y agoSeparation of powers is a government thing, FICO is a product sold by a private analytics company. It's also not the only score used
- lotsofpulp 6y agoAlmost all big financial institutions do not solely rely on FICO scores. They almost all have their own method of scoring. For any large items, such as home mortgages and business loans, I don’t think scores are even used. There’s a person evaluating the applicant to determine if they meet underwriting standards.
- Spivak 6y agoMortgages definitely use credit scores — they just don’t only use credit scores. Without that data point they would have a hard time evaluating if you’re a good borrower. They can independently evaluate if you could pay your mortgage but not that you actually will.
- lotsofpulp 6y agoI specified FICO scores. Mortgage lenders might also use their own credit scores, or credit scores from a different data analytics company. Either way, a score is just a heuristic to avoid wasting underwriter’s time combing through someone’s finances. Once you pass whatever score hurdle a mortgage lender has set, you still have to pass the manual review.
- zrail 6y agoScores are an input into the decision on what rate you pay and probably an input into underwriting, but they're not the sole input. Car loans, though, I think are almost entire driven by scores.