FICO Facts

Posted: February 19, 2007 in Blogs I'm reading!, Budget, Cars, Consumer Issues, Credit, Finance For Youth, Saving, Spending

Every day I look at my stats and I look at what questions are popular out there.  Every day, the same questions come up from people who want to know more about finance.  They always ask about FICO.  They want to know how to see their FICO, they want to know how to change it, they even want to see which FICO is required to qualify for a loan.  My big fear is that young people are going to start becoming obsessed like their parents about FICO.

 Having been a loan officer for a long time, let me say that loan officers are the most overpaid, underworked people in the job market.  What they do requires no skills, little training, and absolutely no personality.  The sum total of what most loan officers do is this:

  • Make sure all lines are filled out on application.
  • Look at FICO score.
  • Compare requested amount with chart that dictates what loan can be approved.

This is obviously only part of the story, but this is as much as many loan officers will ever find out.  FICO is as important as any other private company that says how good you are at anything else.  It’s high school all over again.

Now for some truth amid all the myths you have read in other places.

  1. I know personally, and have seen applications come across my desk, 18 year olds who have “700”+ FICO scores, even though they don’t have any actual credit.  What they have is parents who have put them on credit cards to use for emergencies.  The kids get the benefits of the long credit history without doing any of the actual work.
  2. Conversely, I know people in their late 50’s and older who have never had problems with homes, cars, etc, with no FICO score whatsoever.  They may be widows, or divorcee’s who have no individual credit, but have had a good history.

To most loan officers, the young person gets the loan, and the older one doesn’t.  Is that right?  Does that seem fair?

What you can do.

Instead of obsessing over an arbitrary number, focus on paying your bills on time, living up to the obligations that you start, and not borrowing more than you can really afford to pay.  As long as you do these things, as well as staying employed, your FICO will be fine, but most importantly, you will be fine.

Advertisements
Comments
  1. Clever Dude says:

    In a mortgage loan, they’re going to check more than your credit score. They’ll check your income history, credit report, and anything else they need to build confidence in your application.

    For auto loans, I’ve seen them just care about my credit score and gullibility. They like the score, but hate my confidence.

    Of course, I shouldn’t have gone in for new cars in the first place.

  2. Wil says:

    Clever-

    Thanks for reading and responding!

    Actually, Mortgage loans aren’t that different. Mortgage loan officers and consumer loan officers (auto loans etc.) look at a consumer’s FICO as a justification for the credit report, instead of the other way around. Both loan officers look at it like this;

    They have a chart with a range of FICO’s and a range of requested amounts. That gives them a yes or no answer. If it’s yes, they have another chart that compares income vs. amount requested to give the approved amount. The rest of it is all flash so customers think they are dealing with something more difficult.

    One of the reasons I stopped being a loan officer was that I didn’t feel like my job really meant anything. Anybody who learned their multiplication tables from the inside of the Pee-Chee folders could become a loan officer without any regard for the people who apply for loans.

    -W

  3. personal loan application

    Here is something close to the truth, and they dont have any mercy

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s