I was looking at some output the other day whereby the probability of default for a given combination of borrower variables got worse when the income went above a certain number.
I find it fascinating some of the correlations that these algorithms find.
About ten years ago, we had a broker who used to work for a particular lender, and was aware of the following two items, and we were able to change our application accordingly:
1) A mobile phone number, as opposed to landline, in the "employer's phone number" field was one of the things that dropped your score. So we got hubby's boss's permission to list his home number (he had no business landline).
2) Lack of a home fax number also dropped your score, apparently, so we bought a virtual fax number to list on our applications. (You could also use a friend or relative's fax number.)
Back to the increasing probability of default and higher income, I think there is actually some logic to that, when you consider the extremes. If you're dirt poor, and you borrow $10 from a friend, that $10 is a big deal to you, and to your friend, and provided you're honourable, you'll ensure that $10 is paid back.
If you earn $10K per week, and borrow $10 from a colleague, there's a good chance that you'll take a more casual approach to repaying the $10, because the $10 is pretty meaningless to both parties. It's not that you're unwilling to pay back the $10, but it's so trivial to both parties that you completely forget.
I'm far more likely to overlook a $20 bill than a $20K one.
The $20 bill could easily drop off my radar due to its relatively low significance.
I'm not saying that's reasonable or justifiable, I'm just saying that human nature being what it is, the smaller the debt is relative to your financial capacity, the more likely it is that you'll get a bit casual about it.
