Wednesday, January 30, 2008Which FICO?
FICO is an acronym for the Fair Isaac Company, but you knew that right?
FICO was an independent company a long time ago. They developed the mathematics that reduces us all to mere numbers. It doesn't sound wonderful does it?
Actually, being reduced to a number was a good thing. For the first time, that number translated into the realistic odds of you either making all your payments on time or defaulting on your loans.
A LITTLE HISTORY
This was powerful information for lenders. Instead of making long drawn out lending decisions based on lengthy financial statements, the lenders now had a streamlined process at hand.
The fine people at FICO had created a great product. In the greatest of capitalistic ways they sold the company to TRW (one of the three credit reporting bureaus). TRW then sold their newly bought product to the other credit bureaus (Equifax and Transunion), packaging them under slightly different names - The Beacon and Empirica Score.
When you have a good product the next thing to do is change it. Redefine and refine it. If the FICO score helped home lenders understand the chance of mortgage defaults, what about other lending institutions? How about the car guys? So FICO came out with something called the Auto FICO. This number predicts how well the auto loan (or lease) they make to you will perform.
The car guys liked it. They still like it. If you listen to the fast talking lawyers at the end of commercials you'll hear the words "Auto FICO".
Well FICO is at it again. This time they are going after the medical community. You are about to get your MedFICO Score. As you would guess, it hopes to better guess at how apt you are to pay your medical related bills.
Can you see it coming?
"Well Mr. Mueller, based on your MedFICO score we're going to treat your illness with an alternative therapy. We know your very ill but you just didn't qualify for our best therapy."
Does that make me a Sub Prime Patient?
Supposedly, hospitals will check the score, which will be based on the patient's medical bill payment history, only after the patient is discharged. Yeah right.
If almost 80% of credit reports have errors - I'm not so confident this is a good thing.
Labels: Credit
posted by Mike
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4 Comments:
The sad thing is that Medical Identity Theft is not well known and is rampant as well. I can see people becoming "subprime medical" who are in perfect health and the issue won't get fixed with letters or even lawsuits in all likelihood. Right now, the Medical Information Bureau (MIB) basically refuses to change its data even when proven wrong. This could get ugly, or it may actually prove beneficial, bringing needed change to the medical side.
Very true Robert!
Thanks for the insight. I have a good friend of mine who's Father help to start the leading managed health care system. On one hand - great idea. On the other, well we all know how we feel about health care by committee, don't we.
Definitely not a good thing. When quality of life issues are controlled by a single number, that is pretty darn scary!
Hey Mike!
I have a question. How will the recent and continuing series of rate cuts affect mortgage lending? I heard a rumor today that even with the cuts, mortgage rates could go up and it could be even harder for people to qualify.
Thanks!
~ Greg
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