FICO scores are great when you’re trying to analyze the credit potential of someone buying a yacht on monthly payments. But more millions of Americans the entire concept of “credit rating” is merely theoretical and has no basis on real life. In this Mobile Home Park Mastery podcast we’re going to discuss what a “Fightco” score is and why that’s a far better measurement of performance.
Episode 212: America Will Soon Learn The Concept Of Fightco Score Transcript
When I bought my first mobile home park Glenhaven in Dallas, Texas, I had this one resident who was massively behind on their rent. It looked really hopeless. So I was going to go ahead and file an eviction. But they came to me and said, "You know what, I don't want to leave Glenhaven. I like living here. I know that I need to have a place for my family to live where they feel stable, and loved. So here's my plan. I'm going to go ahead and I'm going to get you paid off. These are the dates and these are the amount I will pay you." And they left the office and I thought that person seemed so passionate about this, that even though I don't think they can possibly do it, I'm going to give them a try. Well, they met or exceeded every deadline. I didn't have to remind them of the days they had told me; they were there with the rent. In the end, they not only became fully caught up on the rent, but they were a model resident. I learned then the fact that FICO scores are not the important thing in life. But in fact, FightCo score. This is Frank Rolfe for the Mobile Home Mastery Podcast, we're going to talk about why FICO scores don't work and FightCo scores are soon to be universally adopted throughout America, once the economy collapses.
Now, what is a FICO score? A FICO score by definition is a credit rating. You're assigned a score based on how well you in the past have paid your bills. And that sounds all kinds of good and scientific, but there are a few problems with it. It only shows how you did when times were good for most people. But it doesn't show you what really happens when times get bad. Does that same person who's got that high FICO score while they're employed, curl up in a ball and just lay on the floor crying when they lose their job, or when there's some other crisis or upheaval? In the mobile home park industry, we're constantly faced with many, many customers who have very low FICO scores on paper. Their scores can range anywhere from nearly zero to 400, scores that are not typically allowable to be given credit. Yet, as park owners, we're constantly faced with the fact that most of our customers simply don't have, on paper, that FICO score that is desirable.
But we've all learned over the years, I can still have a model resident, even who has a terrible FICO score. And that's simply because as long as you are the high point or the priority of payments of all the bills coming in, and you always get paid, what do you care if the others don't get paid? If you've ever been in a mobile home park, you see constantly bills spread out over kitchen tables and kitchen counters. And in all those bills, they're typically organized with the highest priority items being at the top left corner. And normally in the top left corner, you'll always find the invoice for their mobile home park rent. Next is typically their car payments. They know if they don't pay that their car will be repossessed, followed by the utilities because we don't pay those utilities will be shut off. But in the bottom right corner of this giant stack of bills are the things that never get paid, such as magazine subscriptions, maybe even the Rent-A-Center payment for the big screen TV. So what does it tell you? It tells you that as long as you're in the high end of the priority, you're going to be fine. Even if x income is not enough to pay all those bills on that table, there is always enough to pay you because people like to maintain consistent and stable housing.
Now, as I look around me and see in America that is one gigantic speculative bubble, a stock market that has no underpinnings on anything to do with reality. Warren Buffett, Charlie Munger, many people have written articles and expressed their own warnings. You are in the middle of a speculative bubble that will soon burst. And I see home prices all around me that have never been higher, not even before the Great Recession. And people still try and tell me that they make sense. Well if they made sense now, why didn't they make sense in 2007? The bottom line is when these things plunge, all Americans will probably fall into the same category of a lot of mobile home park residents: they will on paper have low FICO scores.
Now you saw the same phenomenon after the Great Recession. Many people who seemingly had very successful positive lives with very positive scores suddenly were cast into the group that did not have good credit. And when you don't have good credit, your only chance out of that is for someone to take a gamble, to have faith in you, to trust you. And that's what mobile home park owners do every day. Now the way we also get around having people with low FICO scores succeed is we focus on what's really important. As a park owner, what's really important is not a number on a sheet of paper or FICO score, it's looking at the ratio of their actual income to the payments. Most mobile home park owners like to see a resident who has income of roughly three times their housing cost. Why? Because we are all told by the federal government, that housing should represent a third of your income. Now, that's not that hard to do with mobile home parks, because mobile home parks are very inexpensive to live in. The average customer probably has a total housing cost of somewhere between $300 and $700 a month. And that means even those earning minimum wage at $7.25 an hour, the lowest in the entire nation can still make their housing payment.
However, there's more expensive housing options out there. The condominiums and the homes in the class A very expensive apartments, they will have great difficulty finding anyone who qualifies under those kinds of FightCo requirements. And all forms of luxury goods will be cast into a horrible position. Because how can you then extend credit on a yacht or a second home if you're not really sure where you sit in the priority payment pile? Are you at the top, are you at the bottom, or are you at the middle? People who don't know how mobile home parks operate are unaware of the fact that mobile home park owners do a service to the residents that no one else will do. We extend credit constantly, even when all around us would say, "No, don't do it." Most of our residents based on their FICO score on paper, if they were to go down and try and buy many of the things that you buy, they would be denied. And they would also be denied favorable rates even if they were approved. Yet mobile home park owners rarely get the credit for this very essential service in society. We give people a second chance. We give people a chance, who want housing, to make that happen, not based on some numerical score on paper but based on their passion and their enthusiasm to do so. We trust them when others will not trust them.
Now as America finally enters into the panic stage of that speculative bubble, as things decline rapidly and millions and millions of Americans are cast about with horrible FICO scores, it will be time for America to refocus what a FICO score even really means. Does it mean that you aren't able to make payments? Or does it mean at one point in time you couldn't have made payments and yet you're permanently branded with this terrible score, until such time as that evolves and erodes with just the passage of moments and hours? Mobile home park owners however, don't grasp the FICO as the important piece of their customer. We look at the FightCo. We look at their ability to pay, we look at their enthusiasm about pain, and we offer a fantastic value to try and keep them with us at the top left corner of that pile. As long as we're at the top of the pile in priority, we will get paid. Other businesses that share that top left corner of priority will also soon learn this lesson. Those businesses which cater to the bottom right corner of that priority pile will also learn a bitter lesson. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.