FICO is a risk analysis, and not a “fairness” index. It looks back over approx seven years of credit history to evaluate risk in payment of debt, and not overall credit health. We all know that factors such as income, debt to income, age, marital status, and employment history, just to mention a few, are relevant indicators of credit stability. But none of these are part of the FICO algorithm. FICO is more a measure of the past track record of individuals in actually paying their obligations, not how much they have in the bank, or what their paycheck is each month.
The FICO model is based upon statistical review of millions of past credit histories. It is simply risk analysis. It is a mathematical correlation of the potential risk of actions on future repayment of debt. Period. It is not an attempt at individual fairness. The 10-12 multiple buckets used by FICO are there to compare you with those of similar circumstances, which makes absolutely logical sense when viewed from the intent of FICO. I, for one, find it much more comforting to know that I am being compared with credit peers than with the mass population.
Sure, I agree fully that a 100+% increase in a low credit limit card in a single month does not measure one’s real credit stability, but it does indicate recent spending. Somewhere in the statistical data compiled over years and years on millions of credit reports, the data must show some correlation between rapid spending increases on a TL and risk of future repayment.
I take FICO for what it is. I do not have the statistical data to criticize it for what I would like it to be.
