Welcome back to the Fintech Takes podcast. I’m your host, Alex Johnson, joined by Martin Kleinbard; advisor at Granular, ex-CFPB, and author of the absolute banger of a research report How Cash Flow Data Can Diffuse the Credit Score Time Bomb (which we just published on Fintech Takes!).

Martin and I have been having nerdy off-the-record chats about credit risk and underwriting systems for years. But with his new research report, we had to hit record.

First, we dig into the true origin story of FICO; not just the 1989 launch, but the regulatory vacuum left by 1970s civil rights legislation. And how that vacuum gave rise to the idea of a generalizable, “objective” score. A score that quickly became a proxy for trust. A tool turned institution.

We unpack how:

Laws meant to reduce discrimination led to over-standardization

Securitization needs quietly reshaped how lenders priced risk

A single point estimate became the underwriting gospel, even in the face of wildly diverging real-world ability to repay (!)

Then, we turn our attention to now. Today, AI’s juicing scores faster than lenders can keep up, but they’re downgrading inflated FICOs when they can. This leaves consumers feeling betrayed, and the industry on the edge of a trust collapse. So, when trust in the score dies (and your customers feel misled), is there a plan for what comes next? Tune in to find out.

This episode is brought to you by:

Newline™ by Fifth Third is an innovative, API-first platform that enables fintechs to launch embedded payment, card and deposit solutions directly with Fifth Third Bank. Visit Newline53.com to see how Newline can elevate your business.

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