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New Visitor
Posts: 3
Registered: ‎03-13-2007
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People will never learn...

Its all about the big boys making more money....  That is why there is so much crime in the country today. Or should i say the world. Now that the average Joe found a way to make his dream of owning a few things in this world without stealing them the CCC's found out they are losing too much interest money and want it stopped. So everyone stop the AU's so the banks can get richer. Yeah that sounds like a plan alright, for a moron. If the people paying to get their credit better don't make their bills on time they will be right back in the same boat. So whats the big problem???
Leave the Fico system just the way it is. Because the bottom line is the rich want to get richer.... We are not communist yet.....  Just my thoughts...
Valued Contributor
Posts: 2,374
Registered: ‎03-15-2007
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Re: People will never learn...

In the long run, dropping AUs isn't going to make the banks any richer.

Let's say that next school year, high school teachers as a whole get mean and ticked-off, and decide to grade tighter. Where last year the interquartile range of GPAs was 3.5 and 1.9, this year it's 3.1 and 1.4. Where in a class of 30 a third got over a 3.0 last year, this year a tad less than a fifth manage. Guess there'd be a lot of empty seats in college the following year, since everyone's grades went down, right?

A moment's reflection, plus the application of some basic economics, are enough to show that nothing would really change. There are a set number of seats in college, and those seats will be filled by the butts with the smartest heads attached to them. The admissions officers would realize rather quickly that grades this year trended lower, and so the cutoff point for college eligibility would be lowered to admit the same number of butts into those seats. Where last year a 3.5 may have been necessary, this year the cutoff will be 3.2.

The same principle applies to loans and FICO. There is a set amount of money banks can loan out. They're going to loan that money, because that's how they make a profit. And the interest they charge is going to be the same, because interest is simply the cost of using someone else's money, and a change in the FICO system alters neither supply nor demand for loan money. If taking away AUs tanks the average FICO score 30 points, then before long a 660 FICO is going to draw much the same interest rate and loan eligibility as a 690 FICO did before the change. The cutoffs will be moved just as they were in the grades analogy above.
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in a credit-scoring postnuclear Stone Age...

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