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General Category => General P2P Lending Discussion => Topic started by: Fred93 on October 22, 2018, 12:05:07 PM

Title: FICO score inflation
Post by: Fred93 on October 22, 2018, 12:05:07 PM
This image appeared recently in the WSJ. 
(https://forum.lendacademy.com/proxy.php?request=http%3A%2F%2Ffred93.com%2Ffbi%2FFICO-score-inflation-2018-10-22.png&hash=2fdbb0e8a2b81226c7283b60e4f49d8a)
What do you think about this?  Does it show that US borrowers have all been getting a lot better during the last 8 years?  Or does it show that FICO scores have been inflating for the last 8 years?

I believe it is some of each.  The chart starts at the time of the financial crisis, when lots of people were having some trouble, and just about everything has gotten better since then.  However, we know that there was some difficulty in borrower-land in 2015/6 because we saw huge dips in performance of LC and Prosper loans, and also dips in performance of subprime auto loans.  That certainly is not indicated here.
Title: Re: FICO score inflation
Post by: Rob L on October 22, 2018, 09:05:26 PM
Wonder how that correlates to the S&P 500?
Not that it should but it certainly appears to do just that.
Also probably correlates well with student debt.
I'll admit I haven't done the math.
Title: Re: FICO score inflation
Post by: yojoakak on October 23, 2018, 04:55:53 AM
Is 15 points a big change?

Can you replot it so the Y-axis starts at 0?
Title: Re: FICO score inflation
Post by: Rob L on October 23, 2018, 09:07:02 AM
Another overhaul in store (the UltraFICO Score):

https://seekingalpha.com/news/3399530-fico-plans-big-change-credit-scores?ifp=0 (https://seekingalpha.com/news/3399530-fico-plans-big-change-credit-scores?ifp=0)
Title: Re: FICO score inflation
Post by: Fred93 on October 23, 2018, 12:36:41 PM
Another overhaul in store (the UltraFICO Score):
https://seekingalpha.com/news/3399530-fico-plans-big-change-credit-scores?ifp=0 (https://seekingalpha.com/news/3399530-fico-plans-big-change-credit-scores?ifp=0)

This story is overblown.  UltraFICO is not an "overhaul".  It is another new score.  The scoring companies already have dozens of different versions of FICO and FICO-like scores, and different customers buy different ones from them.  They are an array of products, like the stuff on the shelves at the supermarket.  This is just one more score.  Newspapers wrote this into a plot that does not exist.
Title: Re: FICO score inflation
Post by: bobeubanks on October 25, 2018, 01:13:27 AM
Is 15 points a big change?

Can you replot it so the Y-axis starts at 0?

 FICO doesn't start at zero though but rather at 300. But the WSJ should be ashamed of graphing it in a way that is misleading as you note.
Title: Re: FICO score inflation
Post by: rawraw on October 28, 2018, 08:43:49 AM
I don't think this is a big deal. There are too many variables and I'm not confident I understand what the chart is measuring.
Title: Re: FICO score inflation
Post by: Birdsing on January 03, 2019, 10:50:51 AM
FICO doesn't start at zero though but rather at 300. But the WSJ should be ashamed of graphing it in a way that is misleading as you note.

Why would they do something like that though? Do you think it was malicious or just an oversight?
Title: Re: FICO score inflation
Post by: Edward Reid on January 08, 2019, 11:23:38 AM
the WSJ should be ashamed of graphing it in a way that is misleading
Why would they do something like that though? Do you think it was malicious or just an oversight?

I'd say ignorance of proper and honest presentation of statistics. Also, very likely the graphic was produced by someone other than the author and the two were joined by a harried editor.

Still, this is one of the most basic and well known errors in data presentation. The WSJ should be ashamed. I don't read it, but based on this I would not trust them with numbers.

Edward