The AL zone

I recently twittered, “Bad credit verses good character, is the fico scoring system a roadblock to recovery?” This statement was also my status on Facebook. The response was very interesting. For the most part some people’s responses to the post immediately blamed Americans with low fico scores for the collapse of the economy and no assistance in raising individual’s fico score was needed because they were the culprits that caused the problems. I can not say for certain who or what caused the collapse in the housing or mortgage markets, I would venture to say it was not just people with low fico scores. Too often in this country we take a lynch mob mentality and move from one extreme to another. Too often we seek to lay blame without fully understanding the circumstances. So let’s look at my post, bad credit good character. For many Americans who have enjoyed good credit ratings throughout the years that have been impacted by job loss, short sales or foreclosures have lost a valuable foothold on their future by loosing their fico score rating.

How is your quality of life connected to your fico rating? Picture this for a moment, you lost your job and due to that you had a few late payments on your mortgage. You took the responsible steps to short sale your property but in the background your fico score has suffered as well as drastically reduced. So here you are looking for an apartment and applying for jobs and having difficulty doing so because you have a low fico score. This number now is impacting the quality of your life and your future. Because you may not be getting that job or the apartment you were hoping for.

First lets talk about the number, FICO. The magic number, the secret number, what is FICO?  From many of the Facebook responses I received I found many people don’t understand what fico is and how it truly impacts our lives. Here is wikipedia’s 411 onFICO……  http://en.wikipedia.org/wiki/FICO_score#FICO_score

A credit score in the United States is a number representing the creditworthiness of a person or the likelihood that person will pay his or her debts. The Fair Isaac Corporation, known as FICO, created the first credit scoring system in 1958, for American Investments, and the first credit scoring system for a bank credit card in 1970, for American Bank and Trust. A credit score is primarily based on a statistical analysis of a person’s credit report information, typically from the three major American credit bureaus: Equifax, Experian, and TransUnion.

When the dust has settled and the crisis is over credit scores will be victim #1. The question of the day is how do we rebuild and will this loss of American credit power slowly recover. Do we need to start looking at new ways of assessing risk in credit such as Vantage Score? www.vantagescore.com. The key here is education and advocacy, because in the land of opportunity you need the right number to move forward like 680 and up.

Alexander Chaparro
alex@alexchaparro.com