Silicon Valley: We Don’t Trust FICO Scores

[mitchblue]

I wonder if they just look at you and think , "yes you have a "will pay us back"" face.

[CBetc]

A lot of this is basic Silicon Valley solutionism... specifically of the Millennial and Big Data type.

Instead of a FICO score, they think they can come up with another algorithm by praying to the altar of Big Data.... That's fine, and more power to them to try to come up with a better result, but what they don't realize is that credit scoring using a defined model was put in place for a reason. Several reasons, actually:

1) More socially equitable credit ranking

2) Clear reasons for numbers as an end result

Big Data algorithms will spit out a number, and might match the curve of repayment rate well, but even with 10 data scientists looking at the issue, they may not be able to say precisely why someone was or wasn't approved. And if it's one part of a holistic credit decision, well... welcome to mortgage lending.

[Anonymous]

I took a look at the SoFi site and the member community.

It looks like its a tight knit community, many of which happen to run in the same Sillicon Valley circles in Cali.

I'd love to know what the criteria are for their underwriting if FICO is gone. Are they underwriting loans to STEM grads?

[sr383]

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@Anonymous wrote:

I'd love to know what the criteria are for their underwriting if FICO is gone. Are they underwriting loans to STEM grads?

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They even loan to us liberal arts grads, sometimes. 

[RonM21]

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@Anonymous wrote:

Silicon Valley: We Don’t Trust FICO Scores

"A new generation of lenders is challenging the usefulness of one of the bedrocks of the modern financial system: the FICO score.

Social Finance Inc., a San Francisco company that offers student-loan refinancing and mortgages for high-priced homes, has decided to do away with FICO scores in its credit decisions, making it one of the highest-profile lenders to do so. “We just don’t think the score itself is a real driver to credit performance,” says Mike Cagney, chief executive of SoFi, as the company is known."......

http://www.wsj.com/articles/silicon-valley-gives-fico-low-score-1452556468

*Wall Street Journal subscription based. I'm not sure if anyone can find the link that goes around the paywall.

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Very interested angle on things.

[Anonymous]

I think that 5 years would be more acceptable. That's a long timez