Home » Economy » They’re Lying To Us, Part 5: Fake Credit Scores

They’re Lying To Us, Part 5: Fake Credit Scores

by John Rubino on August 10, 2014 · 7 comments

Like any other weak-willed entity, an over-indebted country eventually finds that formerly-easy things get harder to do. Today, for instance, banks are having trouble attracting customers with the kinds of credit scores that meet previously-set criteria for mortgages and car loans. As a result they’re writing fewer loans and the economy is seeing less debt-fueled growth than policy makers think is ideal for the run-up to the next election.

So the government has begun a mass-education program to teach citizens how to manage credit wisely and limit borrowing to highly productive projects. Just kidding! What the government is actually doing is changing the way credit scores are calculated to raise them to fit bank lending standards.

This of course should not be a surprise, since it has recently become the policy of most US institutions to define standards downward in a pinch. College grade inflation is an obvious example, as is the fact that government inflation, unemployment and GDP statistics are systematically distorted to make bad numbers look better.

In this latest case, credit scores will no longer include the impact of past-due debts that have been settled and will give less weight to debts relating to medical expenses. Take those things out and voila, the average American has a lot better-looking credit, more of them will qualify for mortgages, more homes will be bought, and the economy will be stronger in November 2016.

For a longer, very well-done look at this subject, see Zero Hedge’s As “Housing Recovery” Fizzles A New Scheme Emerges: Boost FICO Scores By Changing The Definition

  • Bruce C

    As long as people keep going along with these “tail wagging the dog” gimmicks then things will keep going along. So far, the financial system cares only about the “headline” numbers and little about the realities behind them. This has been going on for years already so it will be interesting to see for how much longer.

  • AirborneSoldier

    I used to think it was just Kabuki Theatre. Now I see it is merely a puppet show. Incredible.

  • Hello

    Moving the goal posts (a.k.a. FICO scores) doesn’t change the fact that people aren’t able to pay their medical bills.

  • outcast

    With all the little wars popping up, the big one can’t be far behind. All these smoke and mirrors won’t matter much longer anyway.

  • Tony D

    So begins the slow but inexorable slide back into a subprime type crisis when those who cant pay, dont pay

    • Ranger

      Timothy J. Mayopoulos was head of Fannie Mae and Freddie Mac after 2008. He was repaying all the TARP money from the bailouts and was even exceeding the payments where the debt was almost paid off.
      That was the reason he was removed and Mel Watts placed as Head of FM, FM.
      Mel Watts is the bankers whore and protector!

      They want to loan loan loan, or the system collapses.

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