Re: FICO or FICA?? What is the difference?

Posted by Paul (207.44.154.35) on February 21, 2004 at 21:35:21:

In Reply to: FICO or FICA?? What is the difference? posted by SB on February 21, 2004 at 16:27:28:

A FICO score is a number generated by mathematical models using a number of parameters that allows creditors to accurately predict what percentage of people will eventually default on loans. It doesn’t tell anyone WHICH individual people will default, but it does tell them X% of people with a given FICO score WILL default. It is very much like actuarial tables used by life insurance companies to predict the number of deaths for a group of people in any given year. Again, not WHICH people will die, but what % of people in that group will die. This allows creditors to price the default premium for each customer’s interest rate according to their FICO predicted likelihood of losses expected from bad loans. Thus allowing creditors to make enormous profits even while sustaining many bad loans. Again, the bad loans were already predicted and accounted for. A default premium is added to everyone’s interest rate to indemnify the creditors against losses.

http://www.myfico.com/myfico/CreditCentral/ScoreConsiders.asp

FICA is a Social Security Administration term.
“Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA). The payroll taxes are sometimes even called "FICA taxes."

http://www.ssa.gov/mystatement/fica.htm

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