If you wanted to get a truly accurate picture of an individual's creditworthiness, you'd want to include factors like salary, past payment history, career risk, health risk, family situation and so on. But for the most part, the lending market operates on the assumption that a single numerical score, the FICO score, can adequately synthesize all of the relevant data into a useful indicator for lenders. However, the recent breakdown of the subprime mortgage market has some market participants wondering whether the FICO score is becoming irrelevant
. Certainly, it did an inadequate job of anticipating default rates among borrowers on the low end of the spectrum. Critics are also pointing out that the system has only been used by mortgage lenders since the 90s, during which housing prices have steadily grown along with the economy. Thus, the system hasn't been tested during a period of slumping housing prices and significant economic weakness. Already, we've seen new services spring up that try to give more detailed information on the reliability of a borrower or renter
, in an attempt to break the stranglehold on the market held by the credit reporting agencies. If banks and other lenders continue to grow dissatisfied by the FICO system, it's likely that more alternative institutions will emerge.