Levchin: FICO scores badly misrepresent young people and new immigrants
Max Levchin · 20VC: Max Levchin on What Makes A Truly Great CEO, Why Self-Awareness Is The Most Important Trait For Entrepreneurs & Why When There Is Doubt There Is No Doubt · Jul 14, 2017 · at 3:32
Max Levchin, co-founder of PayPal and founder/CEO of Affirm, explains why traditional credit scoring models fail younger demographics and inspired the founding of Affirm.
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“In the process, we realized that the old FICO score actually works fairly well for people that have had a fairly long financial history. And so if you are a well-established baby boomer, aged, my parents' age sort of person, then the FICO score probably serves you very well. You will be generally correctly ranked, and you will be given the right rate for your loan. It works just fine. But if you're young, or a student, or a recent graduate, Or a new immigrant, or all these sort of people that make the bulk of the future economy, you're typically pretty badly misrepresented by the Fikers Court, because you just haven't had that many financial transactions in your life.”
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