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

  • Written by Syndicated Publisher No Comments Comments
    August 19, 2014

    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

    Images: Flickr (licence attribution)

    About The Author

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    DollarCollapse.com is managed by John Rubino, co-author, with GoldMoney’s James Turk, of The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a Eurodollar trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He currently writes for CFA Magazine.

     

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