| By Greg Fisher
If some guy tries to tell you what a good credit score is, run away.
The highest score possible in any system is definitely good. Anything other than that is just somebody's opinion–an empirical interpretation of what he thinks is adequate.
Misunderstanding and consequential misinformation about credit scores exists in the highest quarters. For instance, even the director, Economics and Strategic Research at Fannie Mae gets it wrong.
Given the overwhelming volume of credit scoring information, true and otherwise, Noel Fahey's errors in "The Two Phases of the Housing Bubble: Part II" are understandable. But, given his station and access, they are significant.
First, he states that the credit score used to make his points is "the" FICO score.
Use of the definite article suggests that there is, indeed, such a unique thing, but there is not. The secondary mortgage market company's requirement regarding credit scores lists three, specific versions. But—as has been discussed recently—there are many other FICO credit scores. There is no credit score model and version that is the FICO score.
Despite the 3-score reality in mortgage lending, an extremely clever and pointed one-score notion has its own hashtag. A creditscoring.com identification of an important score model and version (Equifax Beacon 5.0) is an attempt to focus discussions. It's not THE credit score, it's The Real, BIG Credit Score. #TheRealBIGCreditScore
Silly-sounding? Perhaps, but the term is as descriptive as possible. The point is that, too often, dialogue about credit scoring is muddled, confused and confounded due to a lack of a single point of reference. That score is a) Real, Fannie Mae made it b) BIG a long time ago and, historically speaking, an Equifax Beacon score was the first FICO.
If you have a better idea, start your own hashtag.
Fun with numbers
Second, the Fannie Mae executive states, "The score ranges between 350 and 850."
Third, scores in Fannie Mae's scheme actually range from 309 to 844. People striving for a non-existent 850 run a fool's errand. See Myth 12.
Meanwhile, an anonymous, unwitting Fannie Mae writer leads readers into the same trap (as written by a Rupert Murdoch reporter).
Reporting on a Fannie Mae announcement, Wall Street Journal reporter Joe Light states, "Borrowers that have a traditional score calculated by Fair Isaac will still need to meet the 620 minimum, on a scale of 300 to 850."
Fannie Mae amplifies the error in a horrible example of big business-big government-big media footsie.
"Good" credit score folly
Finally, and most importantly, Aunt Fannie's man lends credence to qualitative nonsense by listening to color commentary made by an arrogant scorekeeper. His footnote states, "Fair Isaac Corporation, the creator of FICO scores, defines 660 as the threshold for a 'good' FICO score (see http://scoreinfo.org/FICO-Scores/What-Score-Means.aspx)."
The neat and tidy numbers for Bad, Not Good, Good, Very Good and Excellent seem too convenient given that the score scale allows for much more focus. If there were, indeed, significant points on the continuum, certainly it is a huge coincidence that they just happen to be at 560, 660, 725 and 760. What's going on at 662, for instance?
Mr. Fahey's kowtowing, valuable hyperlink (from an internet domain of a powerful government-sponsored enterprise) is dead; Fair Isaac, the scorekeeper and keeper of the secret formula has left him twisting in the wind. Meanwhile, apparently, Fair Isaac recalibrated the scale from 5 credit quality levels to 4, and the milquetoast description "Not Good" has disappeared.
If you want to be the scorekeeper, shut up and keep score.