Would the weakening of reliance on credit scores lead to economic chaos?

[Liberal_in_LA]

Poll question: Would the weakening of reliance on credit scores lead to economic chaos?

I hate the credit score reporting agencies. I think they are parasites. I started reading this article thinking "good, the social stigma of credit scores is weakening' but they point out that massive numbers of folks will walk away from mortgages if we eliminate the FICO scores. What do you think?

http://www.walletpop.com/blog/2009/03/21/should-fico-scores-ignore-recent-foreclosures/

While providing FICO score relief to victims of foreclosure has a certain intuitive appeal to it, it actually might be a terrible idea. First, it would make FICO scores even more useless than they already are. Second, it would eliminate the one remaining reason that people have not to give up homes they're underwater on.

One of the primary motives behind all the housing stimulus programs has been to reduce the amount of inventory on the market in distressed areas. If you give people on more reason to give up their homes, the hardest-hit markets could be even more flooded than ever. About 52% of Nevada mortgages are underwater, followed by 32% in Arizona and 30% in Florida and California, according to First American CoreLogic.

[barbtries]

1. my opinion is

that credit worthiness should be based on facts. apparently the days where your employer would get a phone call to verify your employment are gone. now it's just a score. if people who are underwater with their mortgages are hanging on for the sake of their credit score that's ridiculous in my opinion.

in the interest of full disclosure i suppose i should add that i am essentially off the grid in this respect. no mortgage, no credit card. if i can't buy it i can't have it, and that has been the case since approximately 1987.

[MADem]

2. I am "off the grid" too, by choice. If I want it I save for it.

It just takes a little discipline, is all...

[Name removed]

5. Deleted message

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[Jeep789]

3. We did fine without them before 1970

As far as I am concerned, all they have accomplished is enticing more people to live beyond their means. Do away with them!

[glowing]

7. Yes and no.. there was a lot of discrimination on loans when you dressed up

and went to the bank to ask for a loan with your letters of recommendations.. wing and a prayer.. but the current situation with the predatory lending has racial flavorings as well.. AND your FICO can be determined by your zip code. If you live in a poorer neighborhood, you will have a lower score because the rating system knows that you aren't stinking, filthy rich.

A new system will have to be devised.. most people caught up in job loss and the subsequent bill default will not be able to buy anything or qualify for a loan when they finally do get that job and begin turning things around. Also, how many parents will be able to qualify for loans to help out with college tuition? The FICO score is going to finish off the rest of what Wall Street annihilated.

[Jeep789]

8. Not to mention those not even able to get jobs based on FICO

scores. Employment based on FICO scores must be eliminated now.

[Why Syzygy]

4. It isn't the homeowner's fault

their mortgages are SHYTE.
Why should they take another beating for the BigBanks?

Likewise, it isn't the under/uninsured's fault they cannot pay enormous medical bills.
Why should they take another beating for the BigInsCos?

A lot of flapping good FICO did in averting this deluge.
What's their purpose if not to spare just exactly what we're facing now?

Dump 'em.

[Selatius]

6. A lot of people are holding mortgages they cannot afford with their income...or lack thereof.

Regardless of what we think of FICO scores, a lot of people are going to be forced to retrench to a more sustainable position anyway, one that could be supported by their present income. Will it mean a lot of economic pain and economic upheaval? Yes, but ultimately, I think the end of it will signal a return to a more sustainable order of things as far as buying habits and home-hunting habits. It is like withdrawing from doing crack for several decades. It will not be pretty in the transition.

[adamuu]

9. effin Ayn Rand conservatives n/t

[Igel]

10. We just went talking to people about a house mortgage.

Wife's credit score was 790, mine was well over 800. But while our credit scores are good, our income could use some upgrading.

We said the price range we were looking at, and the guy said we could borrow a lot more. We increased our possible maximum amount a bit and said that was it. He seemed disappointed. He'd have tried to get us pre-approved for twice what we wanted.

Really, it wasn't hard to say 'no' to an unrealistic loan offer. It wasn't.

[Lyric]

11. There needs to be a complete overhaul of the credit score system.

I propose a new system with the following changes:

1. All medical debt is erased permanently from your credit file, and all medical-debt reporting is to immediately stop. That information is sacrosanct because it's a direct indicator of your personal medical problems and the severity of such; NOBODY deserves to be privy to that knowledge save for you and your doctor. On top of that, everybody has so much medical debt right now that most places don't even bother to *count* it anymore, because if they did, NOBODY in the lower and middle classes above the age of 30 would qualify for credit. It's pointless and it's an invasion of privacy--it needs to go.

2. Disallow determining credit scores based on geography.

3. Change the system so that debt falls off of your credit report in five years rather than seven. Then fix the loophole that allows collection agencies to keep selling the same debt back and forth to each other, constantly "re-upping" that timer.

4. Get rid of automated "scores" and just give potential creditors a printout to read; too many people are denied credit based on some arbitrary, computer-generated score, and unlike in the old days, there's no opportunity to explain extenuating circumstances. For example: my abusive ex-husband DESTROYED my credit when I left him, and the asshole did it deliberately. He bounced checks from our empty joint account all over the place, he defaulted on a car loan, and he stopped paying the rent for the apartment that was in both of our names. There was nothing I could do about it at the time--I was poor, broke, scared for my life, and hiding in another state. By the time I got the paperwork signed to take my name off of those things (I had to do it all by mail and it took forever) the damage was already done. He practically ruined my life for years and years afterward. NOBODY should be able to use the credit reporting agencies as a tool for further abuse--the impersonal, cold, bureaucratic system that currently permits this needs to be dismantled and rebuilt from the ground up.

5. Make sure that all companies who report bad credit behavior are also reporting GOOD behavior. There are too many small companies that report the bad stuff without ever bothering to send in the good stuff. Take my current "holding company" landlord: they reported it when we missed a rent payment ONE time, but never reported ANYTHING when we paid our rent ahead by seven months. In fact, they didn't report it when we were making month-to-month payments right on time. That sort of thing should not just be illegal--it should be impossible.

6. There needs to be a companion to the consumer credit reporting agencies in the form of an agency FOR consumers that accumulates a history of COMPANIES. If a company cheats you, screws you over, or does business in an ugly, under-handed manner, there should be a way for consumers to report that behavior and for other consumers to access it before deciding which companies to do business with. Internet reviews aren't enough, as so many of them are fluff reviews from company employees. We need real on-the-ground reports from consumers to battle the rampant fraud and manipulation forced upon us by the greedy business sector, and we need it in a way that doesn't involve the media, because the media is too easy to manipulate.

Feel free to add your own ideas to mine.

:hi:

[Statistical]

12. Some good ideas.

Those that think everything will be pie in the sky without credit scores think again. Lenders will just simply cut off those below the median. Also bring back a lot of hard to prove bigatry. If you are gay good luck getting a loan from a homophobe. Without scores it will be more up to the "professional" opinion of the loan officer. Same thing goes for minorities dealing w/ closet white supremacist. A divorced man who feels burned by his ex-wife denying loan for young female professional.

If you think none of that will happen well it will. Human nature sucks sometimes.

The scores do need to be more transparent and improved.

Medical debt should NEVER be reported. You will never extended credit. No contract. No payment plan. No interest charges. Your ability to pay $150,000 medical debt you didn't plan for has nothing to do w/ your responsability w/ credit obligations.

Consumer rights need to be strengthened. Fixing credit is a pain and you need to deal w/ all three companies. Fix one it should auto fix the other 2. If you report a problem and they mess it up again in the future. $100 fine paid to consumer. If not fixed in 30 days. $1000 fine. If not fixed in 90 days $10,000 fine. If not fixed in a year $100,000 fine.

Quickly we would see mistake free credit reports.