Understanding FICO® Scoring

[bobkelly]

Can anyone explain why one's income has no bearing on a FICO score?  Seems to me that this plays a big part in creditworthiness, yet FICO doesn't use income (or net worth) as part of their formula in creating a FICO score.

[andyaycw]

FICO doesn't care whether you're a multi-millionaire or someone who makes a dime a year.

FICO is an indicator of how capable, how likely you are of paying back money you borrow.

*A multi-millionaire asks me for $100 and I give it to him, but he doesn't pay me back.
*A hobo on the street asks me for $100 and I give it to him, but he pays me back.

I would rather lend the hobo money in future, rather than the multi-millionaire.

[andyaycw]

On another note, sure it's more likely that the multi-millionaire is more capable of repaying the money, but the bottom line is that income does not have a correlation to whether the person will pay on time.

All people care about is whether or not they're gonna get paid back if they loan you money.

[ilovepizza]

Because anyone can spend beyond their limits. Higher income just means they can spend more. It's all about learning control and responsibility.

[TheNewWorldMan]

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bobkelly wrote:

Can anyone explain why one's income has no bearing on a FICO score? Seems to me that this plays a big part in creditworthiness, yet FICO doesn't use income (or net worth) as part of their formula in creating a FICO score.

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Does having a Ferrari make one a better driver than owning a Hyundai?

More income doesn't necessarily make you a better money manager. Ask Michael Jackson.

[javi84]

Does having a Ferrari make one a better driver than owning a Hyundai?

More income doesn't necessarily make you a better money manager. Ask Michael Jackson.

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Or ask any rapper

[ilovepizza]

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TheNewWorldMan wrote:

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bobkelly wrote:

Can anyone explain why one's income has no bearing on a FICO score? Seems to me that this plays a big part in creditworthiness, yet FICO doesn't use income (or net worth) as part of their formula in creating a FICO score.

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Does having a Ferrari make one a better driver than owning a Hyundai?

More income doesn't necessarily make you a better money manager. Ask Michael Jackson.

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I would think yes. Have you ever tried to dodge a raccoon at 110 on a Hyundai. Much easier in a Ferrari. Sorry a little humor.

[atlantaman]

ask any rapper?

[ilovepizza]

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atlantaman wrote:

ask any rapper?

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Professionals in the rap music industry. Millions in income, terrible credit, bankruptcies, but lots and lots of income. lol.

[RobertEG]

I think it is being a bit naive to state that income has no relationshop to ability tp pay debt... it certanly does.  Paying requires both abiliity and willingness. I think a primary reason why income is not included in FICO scores is due more to the fact that income data is something that they simply do not have the ability to collect and update regularly.  Just try to secure a home loan without disclosure of income, and you will realize that it does count.  FICO is thus not an overall measure of try credit worthiness, but more simply a historical snapshot of how you have paid debt in the fairly recent past.