Tweaking the (Un)Fair Isaac and Company score aka FICO

When we first got to the US, we knew that the first thing we had to do is get a credit card and build credit history so we can actually have access to goods and services like real Americans.

This is thanks to the FICO score, a thing developed in 1989, after the FCRA legislation was enacted in the 70s. That’s when Equifax was also born, which later gave way to the biggest identity heist in history, with over half of US residents affected.

What’s this FICO score? It’s what banks, real estate companies, credit card companies and other service providers use to understand if you’re going to pay your bills so they can offer credit of some sort. In principle it’s a good thing, giving access to credit to a broad part of society and allowing everyone to play the game and work towards that dreamy perfect 850 score (which is not worth the effort, by the way, as you’ll do fine with a 780+ score).

But coming back to my issue with it, it’s very rewarding to people who were born in the US and have had credit histories their whole lives, granted they have always been on time with payments and disciplined with their finances. Sure, the ones who overextend, miss payments and default will be hit. But the ones who play the game can win at it.

Except for immigrants. 15% of the score is length of credit, so an immigrant who just arrived to the US is already way behind in the credit game. It will take them 5–10 years to get to a point where they can hope at a perfect score. This is because FICO scores +10 years of history as the best category and removes points for anyone who has less than that. This is the unfairness that I mentioned.

It could be fixed easily. By adding the word “proportional” to the way credit history linked to the moment you become a lawful permanent resident or a lawful non-migrant alien is calculated in the FICO score, they could level the playing field and give access to better credit to more people, not rob them by asking for double digit car loan terms or extremely expensive mortgage rates just because they weren’t born here.

What’s the reason for this absolute anchor? Why having 10+ years of credit is better than having credit 100% of the time you’ve been here? Why 2 years of history is worse than 10 years? Will FICO ever change?

I have started making the argument that credit bureaus need to rethink their business models. In an era of identity theft, hoarding customer information and selling it is no longer a sustainable business model. I should be able to own my own score, based on my own accounts. It should be in my best interest to add as much information to a secure, local datastore and then selectively share proof of these transactions whenever I need to prove my creditworthiness.

Not the other way around, to have 3rd parties store my data and share my information freely with lenders so they can advertise all those loans in my mail.

It’s time for credit scores to change.