Numbers are fundamentally utilitarian. They tell us about the economic world around us; both the big, broad economic world, and our own little slices of it.
Sure, the unemployment rate and GDP are important. But on a personal level, few numbers are as significant as the credit score. It’s one of the building blocks of the consumer economy. “It’s immensely important,” says John Ulzheimer, a credit expert from creditsesame.com, “it controls everything from the terms and interest rates on loans, your access to mainstream loans, what you pay for insurance premiums.”
It’s not overblown, he says, to call the credit score the most important financial metric that we live with.
Some employers look at credit scores to decide between job candidates. Some potential partners look at credit scores to decide between dates.
There's even a dating service that offers to match you up based on credit scores.
800-850 is "MARRIAGE POTENTIAL DING DING DING"750-800 is "take him/her home to Mom"700-750 is a "fixer-upper"650-700 is "fun for a night out, maybe, but bring cash"600-650 is "keep lookin'!"anything below 500 is "RUN because they won't even get a car loan, probably, and how embarrassing will that be at the PTA meetings?"200 is "this person is just pulling your leg and is really royalty"
But it wasn’t that long ago that the credit score we know today, the FICO score, didn’t exist. The first general-purpose FICO score came along in 1989, only 25 years ago.
Highlights from the history of the FICO credit score
- 1958: FICO sends letter to the 50 biggest American credit grantors, asking for the opportunity to explain a new concept: credit scoring. Only one replies.
- 1970: Congress passes the Fair Credit Reporting Act, encouraging privacy and accuracy in credit reporting
- 1975: FICO develops first behavior scoring system to predict credit risk of existing customers, for Wells Fargo.
- 1989: First general-purpose FICO score debuts.
- 2003: Congress enacts the "Fair and Accurate Credit Transactions Act of 2003", which includes the right to free credit reports every year.
- 2014: FICO claims its scores are used in more than 90% of lending decisions.
Before the FICO score came along, lenders did what they could to determine credit worthiness. Not all of it good. According to Frontline:
Credit reporting was born more than 100 ago, when small retail merchants banded together to trade financial information about their customers. The merchant associations then turned into small credit bureaus, which later consolidated into larger ones with the advent of computerization.
By the 1960s, controversy surfaced over the CRAs, according to Chris Hoofnagle of the Electronic Privacy Information Center, a public interest research center. Hoofnagle says the credit reports were being used to deny services and opportunities, and individuals had no right to see what was in their files. In addition, CRAs back then reported only negative financial information as well as "lifestyle" information culled from newspapers and other sources -- information such as sexual orientation, drinking habits, and cleanliness.
Many times, getting a loan was about having the right personal relationships. “You almost always did business with a banker who was a friend of the family, or someone with whom you'd golfed, or someone with whom your parents worked, or you went to church with, or were in rotary club with,” said Ulzheimer. “They would make a decision largely on a gut feel.”
It was a system of credit that left a lot of people out of the credit market based on gender, race, nationality and marital status.
A pair of swans suggests Love Eternal. You often see them in twos, gliding together. But they're not Nature's Coupliest Birds. Which are?
The California teen "ran for the nearest plane," according to the FBI. He ended up riding for 5 1/2 hours to Hawaii, and luckily survived the thin air and freezing temperatures.
Graphic by Shea Huffman/Marketplace
Earth day, at 44, may be a little tired. The United Nations continues to report that the urgency of fighting climate change, for instance, should be red hot. But polling from Gallup shows that fewer people say they worry about it "a great deal" than at any time since 1998, when Gallup started asking the question.
Frank Newport, Gallup's editor in chief, says there's a trend that the top-line numbers don't show: The people who have moved from saying they're concerned about the environment to saying "not-so-much" are Republicans.
"So clearly the fact that this has become a political football has kept the overall concern numbers down," he says. "You’ve got a lot of conservatives and Republicans who say that it's exaggerated, and the concern and alarm are not nearly as high as Democrats say they are."
Fred Krupp, president of the Environmental Defense Fund, doesn’t think that polarization will last. He cites numbers from a poll commissioned by the Sierra Club, showing that young voters want action on climate change.
"To me, that says you’re going to see a return to bipartisan solutions on this issue sometime soon," Krupp says. "Because for either political party to have a future, they’re going to have to address this overwhelming challenge."
Aereo offers consumers in 11 cities a cheap way to watch local stations that deliver network TV shows. The networks contend that Aereo uses a gimmick to thwart the economic vitality of their business.
Shinzo Abe came to power in December of 2012 with a strategy he called "the three arrows." Everyone else in the world has taken to calling it "Abe-nomics." Roughly approximated, you might call it: Inflate, stimulate, and deregulate.
How's it working? Depends who you ask.
Inflate: Fighting the deflationary monster
Deflation, or the threat of deflation, has stalked Japan for nearly 20 years. Deflation is poison for economic growth. Consumers put off today's spending because things will be cheaper tomorrow, wages don't rise, and both of those things reinforce future deflation.
Abe appointed a new Central Bank president, Haruhiko Kuroda, and they went to town on the money supply and interest rates. They proclaimed a goal of doubling the monetary base and achieving inflation of 2 percent within two years, says Georgetown University's Arthur Alexander: "It was like a 222 program, very easy to sell, bumper sticker type of policy."
Some results were immediate.
Longer term bond yields rose as people began to expect inflation and demand protection against it.
"The new approach was also reflected in the exchange rate," says Stanford University's Takeo Hoshi. "It depreciated between 20 and 30 percent in the last year and a half," again reflecting people's expectation that inflation would at some point make the Yen less attractive – a good sign if you are trying to break the back of deflation.
Finally, inflation as measured by consumer price indices eventually rose above 1 percent. Japan may not get to the 2 percent Abe would like, but it’s certainly better than a zero or negative number.
Abe has put forth a major stimulus package, but that, plus the ongoing expense of rebuilding after the Fukushima disaster, has resulted in a government debt of 227 percent of GDP. The country’s fiscal situation was problematic to begin with, and this has made some Japanese even more concerned.
"People are seriously divided," says Ulrika Schaeda, who teaches Japanese business at the University of California, San Diego. It's reminiscent of the debates over government spending here.
A value added tax was introduced on April 1, but opinion is mixed as to whether it is sufficient to stabilize Japan's fiscal situation.
Deregulate: structural reform and the Big Picture
"The verdict on Abenomics will depend on whether or not they do the structural reforms," says Anil Kashyup, professor of Finance at the University of Chicago's Booth School of Business. The structural reforms are the big picture problems.
"There's all kinds of frictions that make Japan an unappealing place to do business," says Kashyup. Starting a business, getting hired full time, even finding childcare is hard in Japan.
Some parts of Japan's economy are subsidized, protected, and unproductive says Kashyup.
"Rice in Japan is seven times the price on the world market," says Arthur Alexander, adjunct professor at Georgetown University. It appeared for a time that some headway was being made on opening Japan up to more international trade and a more vibrant retail sector, "but domestic politics seems to have reared its ugly head," Alexander says, referring to a cooling in negotiations between the U.S. and Japan over the Trans Pacific Partnership trade agreement.
This is the most difficult of Abe's arrows to guide, and it's what Japan watchers will be following closely. So in some ways Japan has changed a lot in a year.
The question is, will it keep changing?
Update, April 22, 8:15 am ET: Mt. Everest's Sherpa guides decided late Tuesday to abandon the rest of the climing season, according to AFP. The decision came after a meeting with government officials in Nepal over insurance and financial aid for victims of last Friday's avalanche on the mountain that killed 13 people.
Original story, April 22, 7:00 am ET: Sherpa mountaineers believe insurance and financial aid for families of victims is inadequate. The minimum insurance policy for the guides pays a death benefit of about $10,000 and the Nepalese government has announced a special payment of $415 to families in the wake of a tragedy. Average per capital income in Nepal is about $645 a year.
The sherpas who climb Mount Everest above the base camp, which is where the danger begins, make a base salary of about $2,000. But their pay is also determined by a bonus sytem for delivering loads to various camps. If they make the summit, they are paid $250 the first time. And every additional summit is worth $500, according to Conrad Anker, the world-renowned mountaineer who has scaled Everest several times.
"A good sherpa can earn between $4,000 to $6,000 in pay in one season," says Anker. "But it is extremely dangerous work."
Anker says the economics in Nepal, outside of the climbing season, is mostly subsistence agriculture.
For the past three decades, China’s growth model has been anchored in building big projects: highways, bullet trains, and real estate. And that’s left hundreds of cities across China, nearly empty – ill-conceived projects built for the sole purpose of boosting GDP growth.
An empty shopping mall in the ghost city of Ordos, China.Rob Schmitz/Marketplace
As part of Marketplace’s stage performance in the beltway “How I learned to stop worrying and love the numbers,” China Correspondent Rob Schmitz will take audience members on a tour of China’s ghost towns, ghost malls, and ghost suburbs, delving into the numbers that explain how a land of 1.4 billion people can have so much empty real estate.
A glimpse into China's most-famed "ghost cities"
China has laid out an ambitious plan to transform 250 million people from the countryside into city dwellers in the next 20 years. Its push for urbanization has encouraged local governments and developers to build skyscrapers and residential complexes, many under the belief of “build it and they will come”. However, the construction spree has left soaring debt, creating insolvency risks for local governments and inflating the country's real estate bubble. By China’s official account, China’s local governments owed $ 1.8 trillion of debt by the end of June 2013, about a third of China’s GDP. A CLSA report says China is "addicted to debt".
We'll take listeners to a Chinese replica of Manhattan, a city that was built to replace New York City as the world’s financial capital, but is now one of the world’s largest abandoned construction sites. He’ll bring listeners on a journey to one of China’s largest ghost cities, a metropolis built for a population the size of Pittsburgh’s, but that is now largely empty, a place where squatters have begun to occupy empty offices and where the government is in so much debt that it’s turned to developers to bail it out.
The city of Yujiapu is being built to become the world's largest financial capital. Construction on the city, a replica of Manhattan, has been recently halted due to a lack of investor confidence.Rob Schmitz/Marketplace
It’s a side of China you rarely hear about, but it’s an incredibly important phenomenon to understand to grasp the totality of the economic changes China’s embarking on as it attempts to rebalance its economy.
Activist investor William Ackman has set his eyes on a new target: Allergan.
Ackman has joined forces with Valeant Pharmaceuticals to purchase the Botox-maker for an undisclosed amount -- $50 billion is one educated guess. Ackman along with other so-called corporate raiders Carl Icahn and Nelson Peltz, have become famous, and sometimes infamous, for shaking up the companies they invest in.
Do they do more harm than good?
Bloomberg News reporter Tara Lachapelle joins Marketplace Morning Report host David Brancaccio to discuss the track record of activist investors, noting that more often than not, these in-it-to-win-it investors are actually a shareholder's friend.
Click on the audio player above to hear more.