Credit Scoooooooooore! By Tom Lewis of DailyImpact.net
A hat tip to attorney Tom Cox for introducing me to Tom Lewis and his blog, DailyImpact.net. According to his site, Tom is a “broadcaster, public speaker and advocate of sustainable living.” He also published a book in 2009 titled, “Brace for Impact – Surviving the Crash of the Industrial Age.”
When I read the article below, all I wished was that I had written it… it’s not only insightful and correct, but it’s just incredibly well said in very few words. It’s about an announcement made about a month ago by Fair Isaac, the company that provides our FICO scores, which govern our access to credit, that they are introducing a new higher score “that will give you a satisfyingly high number if you have managed to keep the lights turned on in your house, and that ignores sticky-wicket issues such as repossessed stuff and delinquency nonsense.”
As I’ve written in past articles on Mandelman Matters, they need us more than we need them, meaning that it may seem like the banks have all the power and we have none, but that’s not actually the case. They need us to keep borrowing and spending in order for them to make the obscene profits they’ve become accustomed to… our economy has become dependent on our borrowing to grow and prosper.
And Fair Isaac is there to help make that happen. So, if you’ve lost a home to foreclosure, filed bankruptcy, or just fallen behind on bills over the years since the meltdown of 2008-09, don’t despair too much… Fair Isaac is going to do whatever it can to get you borrowing again.
The question is… will we all fall for it again? I don’t think so. Our parents and grandparents that lived through the Great Depression were permanently changed by the experience, and as I’ve also said many times, this crisis has not only affected more than 10 million homeowners, but you have to think that their children have been impacted as well… which is certainly one of the reasons why first time buyers haven’t materialized as they have in the past.
But, by all means… read Tom’s post “Credit Scooooooooore!” below, most of it’s there and just click the link at the end that says, “MORE,” to read the rest. It’s really good, and says it all in remarkably few words.
And I would encourage you to check out several of Tom’s other finance related posts, like “US Repeals Laws of Mathematics,” “The Crash of 2015 – Reckoning Day,” and theres also, “Holding Accountants Accountable,” and “The Consumer Economy Becomes Consumptive.” I confess that I haven’t read all of them, but based on this one, I’d say they’re all worth a look.
By Tom Lewis of DailyImpact.net
I don’t know why we worry so much, when American ingenuity has always risen to the occasion, every single time, to snatch victory from the jaws of success. Once again, American financial engineers have analyzed the problem — the central problem of the American economy — and after having a couple of beers have come up with the solution. Brilliant. Prosperity is at hand.
These particular engineers are employed by Fair Isaac, who is not a handsome English squire, but the oddly named company that assigns the credit scores upon which 90% of all personal lending decisions — from credit cards to car loans to rental contracts — are based. They have come to understand that the core problem of the American economy in the 21st Century, as pungently stated by retail-sales guru Howard Davidowitz, is that consumers don’t have “any fucking money.”
Astute readers of retail history will remember that this problem first surfaced in 1959, prompting the invention of the credit card. That fix lasted until 1999, which was the year every credit card in existence reached its limit. Only briefly perplexed, the financial engineers immediately introduced the house-as-ATM business model, and taught Americans how to refinance their homes every 90 days to pay off maxed-out credit cards and get cash for necessities, such as personal watercraft and all-terrain vehicles. Which worked until 2009, when the market answered the question: “What could go wrong?”
Now consumers are stuck in houses that are under water, slowly paying down credit-card and school-loan debt, and cannot do their patriotic duty for the larger economy by shopping, because they don’t have, in Mr. Davidowitz’s deathless phrase, AFM.
So what to do? We can’t pay workers more money, because that would harm the luxury personal jet and high-end vacation villa industries, and besides it would send the wrong message. We’ve had a pretty good run lending them money for cars. By offering anyone with a credit score higher than his shoe size a no-money down, 100%, six-year loan to buy a Hummer, we have made the auto industry a standout achiever in our otherwise lackluster economy. But we’re running out of people with small shoes.