Fair Isaac Corporation, What a Wacky Bunch of Statisticians Dedicated to Credit
Credit Cards, Credit Reports and Credit Scores. These terms are not exactly new to any of us. Neither are the implications when our own cards, reports or scores are not at their “best”. Credit scoring, first created by a group of wacky statisticians at the Fair Isaac Corporation, affects everyone out there at some point or another. All of us consumers at some time, come across an application for product, merchandise, land or property. Our credit score suddenly looms before us at these times as hugely important, even though we may have neglected it for years or simply months. It is amazing how easy it is for a credit score to change in only a small amount of time.
In the late 1950’s, a small group of statiscians in Minnesota, the Fair Isaac Corporation, wanted to have a look at how what a consumer did in the past or “historical variables” correlated with what would happen at a later date or “future behavior”. Those wacky statisticians and what fun filled conversationalists they must be, huh? Bet they’re a laugh a minute at parties.
They weren’t surprised with their results once they were finished. Turns out that these eggheads quickly discovered that the best way to predict the way a consumer would act in the future WAS based on their history of behavior. To predict whether or not a person would become seriously delinquent, it was as easy as looking at how that person had previously handled similar accounts. And of course, without a hint of egotism from those wacky statisticians, the FICO Score was born. Anyone notice any similar initials from the name of the score an perhaps some corporation?
The FICO, which to the average layperson, who typically falls asleep when sitting and trying to listen to the scientific explanation of FICO, seems to be utterly confusing. Ever changing and updating each time that any new information is gathered or entered into it’s database, credit scores can be hard to understand. Scoring systems may even sound ingenious and while this may be true, there are still several problems facing credit scoring, some of which are scientific in nature.
When using statistics for anything, several problems can arise, such as the “r” value or whether something occurred simply out of dumb luck and can be termed an “anomaly” or random act or whether it was the “average” stuff that we are looking for. Finding averages can be pretty hard when it comes to us humans and all of our random wacky acts.
Placing people in “ranges” when it comes to scores, such as the consumers who score 650-700 on their credit report, can be detrimental to some in the group. Consumers in this group who display different financial habits than the average group member can be hurt by the bad financial decisions of their group, or in turn, sometimes for the people in the same group who display bad habits, their score can still end up higher than it should because of the good habits of the rest of it’s group.
What I guess I am trying to get at is that it seems that the FICO scoring system, while good at predicting statistical trends for large groups of people, falls short when it comes to the individual credit applicant. It seems that when nothing about a persons individual situation is considered, the impersonal and “fast and easy” automation can really affect some consumers, both positively and negatively. I would personally hate to be one of those people trapped in the 650-700 range and automatically judged by the worst behavior of the entire groups bad apple.
My grandmother always use to say, every family has a bad apple in it. I guess when you lump together a group of so many individuals and expect to find an “average” behavior, we are all just humans and choose to do some wacky things and display behavior simply uncharacteristic to us and yet remain still judged in the same category. How does the behavior of people in your credit group affect you and what a wacky bunch of scientists who could have made it easier by just going out and getting laid, instead of dreaming up this system that haunts credit applicants everywhere.
In the late 1950’s, a small group of statiscians in Minnesota, the Fair Isaac Corporation, wanted to have a look at how what a consumer did in the past or “historical variables” correlated with what would happen at a later date or “future behavior”. Those wacky statisticians and what fun filled conversationalists they must be, huh? Bet they’re a laugh a minute at parties.
They weren’t surprised with their results once they were finished. Turns out that these eggheads quickly discovered that the best way to predict the way a consumer would act in the future WAS based on their history of behavior. To predict whether or not a person would become seriously delinquent, it was as easy as looking at how that person had previously handled similar accounts. And of course, without a hint of egotism from those wacky statisticians, the FICO Score was born. Anyone notice any similar initials from the name of the score an perhaps some corporation?
The FICO, which to the average layperson, who typically falls asleep when sitting and trying to listen to the scientific explanation of FICO, seems to be utterly confusing. Ever changing and updating each time that any new information is gathered or entered into it’s database, credit scores can be hard to understand. Scoring systems may even sound ingenious and while this may be true, there are still several problems facing credit scoring, some of which are scientific in nature.
When using statistics for anything, several problems can arise, such as the “r” value or whether something occurred simply out of dumb luck and can be termed an “anomaly” or random act or whether it was the “average” stuff that we are looking for. Finding averages can be pretty hard when it comes to us humans and all of our random wacky acts.
Placing people in “ranges” when it comes to scores, such as the consumers who score 650-700 on their credit report, can be detrimental to some in the group. Consumers in this group who display different financial habits than the average group member can be hurt by the bad financial decisions of their group, or in turn, sometimes for the people in the same group who display bad habits, their score can still end up higher than it should because of the good habits of the rest of it’s group.
What I guess I am trying to get at is that it seems that the FICO scoring system, while good at predicting statistical trends for large groups of people, falls short when it comes to the individual credit applicant. It seems that when nothing about a persons individual situation is considered, the impersonal and “fast and easy” automation can really affect some consumers, both positively and negatively. I would personally hate to be one of those people trapped in the 650-700 range and automatically judged by the worst behavior of the entire groups bad apple.
My grandmother always use to say, every family has a bad apple in it. I guess when you lump together a group of so many individuals and expect to find an “average” behavior, we are all just humans and choose to do some wacky things and display behavior simply uncharacteristic to us and yet remain still judged in the same category. How does the behavior of people in your credit group affect you and what a wacky bunch of scientists who could have made it easier by just going out and getting laid, instead of dreaming up this system that haunts credit applicants everywhere.
Credit Cards, Credit Reports and Credit Scores. These terms are not exactly new to any of us. Neither are the implications when our own cards, reports or scores are not at their “best”. Credit scoring, first created by a group of wacky statisticians at the Fair Isaac Corporation, affects everyone out there at some point or another. All of us consumers at some time, come across an application for product, merchandise, land or property. Our credit score suddenly looms before us at these times as hugely important, even though we may have neglected it for years or simply months. It is amazing how easy it is for a credit score to change in only a small amount of time.
In the late 1950’s, a small group of statiscians in Minnesota, the Fair Isaac Corporation, wanted to have a look at how what a consumer did in the past or “historical variables” correlated with what would happen at a later date or “future behavior”. Those wacky statisticians and what fun filled conversationalists they must be, huh? Bet they’re a laugh a minute at parties.
They weren’t surprised with their results once they were finished. Turns out that these eggheads quickly discovered that the best way to predict the way a consumer would act in the future WAS based on their history of behavior. To predict whether or not a person would become seriously delinquent, it was as easy as looking at how that person had previously handled similar accounts. And of course, without a hint of egotism from those wacky statisticians, the FICO Score was born. Anyone notice any similar initials from the name of the score an perhaps some corporation?
The FICO, which to the average layperson, who typically falls asleep when sitting and trying to listen to the scientific explanation of FICO, seems to be utterly confusing. Ever changing and updating each time that any new information is gathered or entered into it’s database, credit scores can be hard to understand. Scoring systems may even sound ingenious and while this may be true, there are still several problems facing credit scoring, some of which are scientific in nature.
When using statistics for anything, several problems can arise, such as the “r” value or whether something occurred simply out of dumb luck and can be termed an “anomaly” or random act or whether it was the “average” stuff that we are looking for. Finding averages can be pretty hard when it comes to us humans and all of our random wacky acts.
Placing people in “ranges” when it comes to scores, such as the consumers who score 650-700 on their credit report, can be detrimental to some in the group. Consumers in this group who display different financial habits than the average group member can be hurt by the bad financial decisions of their group, or in turn, sometimes for the people in the same group who display bad habits, their score can still end up higher than it should because of the good habits of the rest of it’s group.
What I guess I am trying to get at is that it seems that the FICO scoring system, while good at predicting statistical trends for large groups of people, falls short when it comes to the individual credit applicant. It seems that when nothing about a persons individual situation is considered, the impersonal and “fast and easy” automation can really affect some consumers, both positively and negatively. I would personally hate to be one of those people trapped in the 650-700 range and automatically judged by the worst behavior of the entire groups bad apple.
My grandmother always use to say, every family has a bad apple in it. I guess when you lump together a group of so many individuals and expect to find an “average” behavior, we are all just humans and choose to do some wacky things and display behavior simply uncharacteristic to us and yet remain still judged in the same category. How does the behavior of people in your credit group affect you and what a wacky bunch of scientists who could have made it easier by just going out and getting laid, instead of dreaming up this system that haunts credit applicants everywhere.
In the late 1950’s, a small group of statiscians in Minnesota, the Fair Isaac Corporation, wanted to have a look at how what a consumer did in the past or “historical variables” correlated with what would happen at a later date or “future behavior”. Those wacky statisticians and what fun filled conversationalists they must be, huh? Bet they’re a laugh a minute at parties.
They weren’t surprised with their results once they were finished. Turns out that these eggheads quickly discovered that the best way to predict the way a consumer would act in the future WAS based on their history of behavior. To predict whether or not a person would become seriously delinquent, it was as easy as looking at how that person had previously handled similar accounts. And of course, without a hint of egotism from those wacky statisticians, the FICO Score was born. Anyone notice any similar initials from the name of the score an perhaps some corporation?
The FICO, which to the average layperson, who typically falls asleep when sitting and trying to listen to the scientific explanation of FICO, seems to be utterly confusing. Ever changing and updating each time that any new information is gathered or entered into it’s database, credit scores can be hard to understand. Scoring systems may even sound ingenious and while this may be true, there are still several problems facing credit scoring, some of which are scientific in nature.
When using statistics for anything, several problems can arise, such as the “r” value or whether something occurred simply out of dumb luck and can be termed an “anomaly” or random act or whether it was the “average” stuff that we are looking for. Finding averages can be pretty hard when it comes to us humans and all of our random wacky acts.
Placing people in “ranges” when it comes to scores, such as the consumers who score 650-700 on their credit report, can be detrimental to some in the group. Consumers in this group who display different financial habits than the average group member can be hurt by the bad financial decisions of their group, or in turn, sometimes for the people in the same group who display bad habits, their score can still end up higher than it should because of the good habits of the rest of it’s group.
What I guess I am trying to get at is that it seems that the FICO scoring system, while good at predicting statistical trends for large groups of people, falls short when it comes to the individual credit applicant. It seems that when nothing about a persons individual situation is considered, the impersonal and “fast and easy” automation can really affect some consumers, both positively and negatively. I would personally hate to be one of those people trapped in the 650-700 range and automatically judged by the worst behavior of the entire groups bad apple.
My grandmother always use to say, every family has a bad apple in it. I guess when you lump together a group of so many individuals and expect to find an “average” behavior, we are all just humans and choose to do some wacky things and display behavior simply uncharacteristic to us and yet remain still judged in the same category. How does the behavior of people in your credit group affect you and what a wacky bunch of scientists who could have made it easier by just going out and getting laid, instead of dreaming up this system that haunts credit applicants everywhere.
posted by zzzzzzzzzzz at
2:13 AM
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