FICO takes some heat for the subprime mess

Granted I can't access the article because I am not a subscriber, but it sure sounds like a bunch of meaningless statistics to me. Of course FICO doesn't predict ones ability to repay a loan. Take an individual making $50,000 a year with a $1,000,000/30yr mortgage. Although they may have an outstanding FICO score, it implies NOTHING about their ability to repay a loan of this magnitude. If a loan is beyond an individuals means to repay, it doesn't matter how good their intentions are, they just aren't capable of replaying it.

FICO scores should at most be just one small factor in the decision to make or not make a loan. All FICO scores indicate is a person's past conduct on past loans. A person who has made timely payments on their past loans is more likely than a person who has not to make timely payments in the future. But FICO scores have never been understood as a guarantee, and could never serve as a guarantee, of future repayment. There are simply too many unknowns that can never be factored into a FICO score. How can a FICO score, for example, know that a borrower today is going to die in a car wreck in 3 years and default all loans due to death and lack of life insurance? Sub prime lenders are in trouble for many reasons, none of which involve FICO scores. They stopped requiring down payments, ignored debt to income ratios (perhaps the most important factor for future repayment, but still not a guarantee as jobs can be lost etc), made loans without verifying income or even employment and operated on a false assumption in many markets that home prices and values would continue to rise in the short term as opposed to the long term. These lenders got carried away by their own greed, and should now suffer the consequences of their greed. At the end of the day all loans involve risk, regardless of FICO scores, debt to income ratios or anything else. This is why God invented interest. Lenders suffering high defaults need only look in a mirror to see who is at fault.

It would be wishful thinking to hope for credit reform. I'm not sure the scoring system need to be a mystery. It makes zero sense to me that a consumer can pay hundreds of thousands of dollar in debt responsibly, but get dinged for using more than 50% of their revolving credit, even when those accounts have been paid on time, responsibly. Even more ridiculous is the global default clause which allows every creditor to raise your interest if you are reported late or over limit on once card. There is an inherent conflict of interest in the credit reporting process whereby creditors benefit financially by reporting negative information. Worse, if you happen to borrow money from a predatory lender, make every payment on time, get raped on interest rate, you're considered a poor credit risk simply for doing business with a mouse house. I'm off to write a letter to my senator.
-- 31% interest

Why would FICO be questioned at all regarding the Sub-Prime defaults? Folks with 500 FICOS were given mortgages! Who would have known.... give a mortgage to someone who can't afford, or manage it and they may default!! FICO did not matter when the Greedy SOBs underwrote the loan, why would FICO matter now that the same mortgage is in default?