There are times when the market screws itself up. Then there are times when the government steps in to screw a market up. This is the second thing. The Gov in Washington feels the need to screw up the housing market even further, and this is a really good way to do it. At the behest of Washington, the people who calculate FICO credit scores will be reranking credit scores for people who dont qualify for loans. The only possible outcome of this is that banks will lend to people that they shouldnt and we will get to watch another housing bubble burst. The banks will be blamed again. Also a slew of landlords across America will rent to people who have no business signing a lease. Let the chaos commence. The only thing that I dont know is when?
A Sign of Desperation FICO creates new credit score for one group?
The company that created the FICO credit score has come up with an alternative credit rating system for sub-prime borrowers with lower FICO scores.
Here’s an excerpt from the Wall Street Journal:
“Millions of Americans unable to obtain credit cards, mortgages and auto loans from banks will receive a boost with the launch of a new credit score aimed at consumers regarded as too risky by lenders.
“The new metric, set to be announced as soon as this week, is being developed by Fair Isaac Corp., creator of the most widely used consumer-credit scores, and is being tested in a pilot phase with credit-card issuers. Fair Isaac said it hopes to make as many as 53 million people who don’t have credit scores more acceptable to lenders.
“The new score, which isn’t yet named, will be calculated based on consumers’ payment history with their cable, cellphone, electric and gas bills, as well as how often they change addresses and other factors
“And the new score will instead pull data from a separate database of telecommunications and utilities providers maintained by Equifax. It also will incorporate data from a LexisNexis database, including how often people change addresses, with frequent changes suggesting less stability.”
Is this new credit score a desperate “Hail Mary” attempt by lenders and the government to revive a sluggish economy, or a good way to give challenged borrowers a second chance?