Another Way to Look At It: “FICO”

Another Way to Look At It: “FICO”

Finally something that makes sense…

You know who the Fair Isaac Corporation is – you probably just know them by another name – “FICO”. They are the company that provides, according to one source, 90% of all credit scores in the US. And you may have seen the report a few weeks back that FICO would be modifying their top-secret algorithm for calculating credit scores (more about that later). The reason I believe this is so amazing is because (again, my opinion), FICO and their cousins, the big 3 credit bureaus, are really the only people who can level the playing field when it comes to affecting how credit scores impact a job applicant’s ability to get hired.

First, an editorial comment about credit bureaus and FICO: Is there a bigger or more impenetrable monopoly today in the US? At the risk of slandering organized crime, the credit bureau industry is worse than the Mafia because they operate legally and with virtual impunity. I’ve seen media reports where U. S. Senators, not exactly weaklings themselves, are totally stymied when it comes to changing the way these guys operate. Keep in mind: These are the folks to whom paying multi-million dollar fines is “just the cost of doing business” according to 60 Minutes. So, let’s stipulate that credit bureaus and credit scores aren’t going way or even slightly losing power anytime soon.

Since the Great Recession of 2009, everyone (and by everyone, I mean politicians and government agencies – both state and federal) have tried to assuage the high unemployment numbers with new laws, “rules”, etc., designed to protect people who can’t find a job because, ostensibly, they have bad credit. The problem is 1) there really aren’t that many available jobs and 2) the credit evaluation system is already rigged against people who can’t or aren’t working anyway. It’s a simple equation:

1. Everyone has bills
2. No job = no income.
3. No income = you can’t pay bills.
4. You can’t pay bills = you get a low credit score

Isn’t this just the 21st century version of “Debtors Prison” which, history tells us, didn’t work the first time in the 16th century? And we’re supposed to be surprised it isn’t working now?

Employers are culpable also. Using a credit report to evaluate someone’s job worthiness is a dangerous proposition. When does a credit score matter in a job? We’re not going there (at least not today) but I will say, to be fair, employers are guilty of abusing their access to information and exacerbated the situation. I recently spoke to an HR leader of a 30,000 employee company and they pull credit reports on every job applicant. That’s abuse but it also smacks of ignorance.

Credit scores can and do matter sometimes in some jobs and in interesting ways by interesting companies. What do you think is the number one reason job applicants are disqualified from working at a credit bureau or related company? That’s right: bad credit. How’s that for irony?

It appears someone at FICO had an epiphany. Why don’t we change the way we evaluate credit reports so that unexpected problems like, say, medical bills, are downgraded in their importance? Even better, if someone has a bad debt on his or her report, and they paid the debt, why don’t we just not include that in our algorithm? Fairness – what a concept.

I know I sound cynical and sarcastic (I am both) but what I really feel is shock. But it’s the same shock I feel when I receive good service from someone or a human answers the phone at a business. A true stakeholder in the process actually made the decision to change an outdated and overly-punitive process into something that actually fits what’s going on in our world today. Maybe there’s hope after all.

What’s next – a functional federal government? The Dallas Cowboys in the playoffs? If you’re going to dream – dream big.

– John Pate