Fair Isaac didn't start working on the idea of a quantitative credit scoring system until 1958, and didn't introduce its credit bureau scores until 1981.
That's right: banks used to lend people money without FICO scores. Instead they relied on stuff like employment history and, gasp, character. To get a loan, you used to have to meet with an officer or even a committee face to face, and they'd assess your reliability
As the foreclosure crisis has shown, relying solely on the quantitative can lead to disaster. The old-fashioned bankers might have been on to something. The Wall Street Journalreports (subscription required) that credit card issuers are now expanding their underwriting standards to include a focus on the applicant's line of work and where they live. If you work in construction in Nevada right now, you might have a tough time getting a loan.
This newfound prudence can be tough for some business owners who are seeing their lines of credit slashed for no reason other than that they're in a certain industry -- even if they happen to be faring quite well. But for most individual borrowers, I would say that a slash in your credit availability should be a warning sign that you're skating too close to the financial edge. The bank's metrics that tag you ask risky may be dead on, whether you realize it or not.
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