The life cycle of a credit score [infographic].


The life cycle of a credit score [infographic].

Yet, I truly believe a credit score does not always adequately portray the true risk of an applicant for a home mortgage.

Credit scores have failed to predict large numbers of defaults during the mortgage bust years largely due to the fact that they could not anticipate homeowners’ reactions to economic stresses. There need to be a more sophisticated assessment tools that incorporate more than credit histories in identifying high-risk applicants.


Unemployment rate.

US unemployment rate declined from 7.3% to 7.0% in November. The economy added 203,000 jobs in November, at about the same pace as October. Employment increased in transportation and warehousing, health care, and manufacturing.

US unemployment rate

The unemployment rate in the U.S. averaged 5.8% from 1948 until 2013, reaching an all time high of 10.8% in December 1982 and a record low of 2.5% in May 1953.

Source: Bureau of Labor Statistics.

Jobless claims.

Not surprisingly, applications for U.S. unemployment benefits increased by 68,000 to a seasonally adjusted 368,000 in the week ended December 7th. The 4-week moving average was 328,750, an increase of 6,000 from the previous week’s revised average of 322,750.

The data reflects the volatility that typically occurs around the year-end holidays. Thanksgiving and other holidays may have distorted the data. Due to the technical quirks in seasonality, economists caution against reading too much into November and December jobless claims numbers.

In general, initial jobless claims have a big impact on financial markets because unlike continued claims data which measures the number of persons claiming unemployment benefits, Initial jobless claims measures new unemployment – a layoffs metric.

For these next few weeks, Federal Reserve officials will be closely following the the labor market as they weigh the next steps for their bond-buying program. The stimulus effort is meant to push down interest rates and spur stronger hiring and investment.

Source: US Department of Labor.


Emotional contagion. A process through which one person’s feelings transfer to another through non-conscious mimicry of one another’s posture, vocalizations, and expressions. This applies to a range of emotions: you see someone across the room yawn, often you cannot help but yawn as well; you are comforting a friend and frown, often you’ll feel sad; you walk into work and your colleague is unusually cheerful, you smile and feel happy.

Paul Ekman, one of the foremost researchers on emotion, suggests it’s near impossible to avoid an emotional response because of the way our brains are set up. Furthermore, the contagious nature of emotions can become amplified when individuals are in frequent contact with one another.

It is no secret that we are greatly affected by our environment and the people in it. What we often forget is that we also deeply affect those around us.

Maybe you didn’t get enough sleep last night, or have a long day ahead of you. Maybe you had an argument with a loved one and keep wondering why it happened. Or maybe you had a bad day at work. Whatever the case may be, there are times you feel something you don’t want to, and don’t know how to change it.

The reality is that emotional responses occur so quickly that it becomes challenging to create space between feeling and acting. However, understanding the effect a person’s mood can have on others creates a greater incentive to appropriately deal with our own mood. Dwelling over negative feelings will do to improve any situation and you take the chance of putting someone else down with you.

“We usually think of ourselves as sitting in the driver’s seat, with ultimate control over the decisions we made and the direction our life takes; but, alas, this perception has more to do with our desires-with how we want to view ourselves-than with reality.”
― Dan Ariely

Sources: Emotions Revealed, by Paul Ekman; Predictably Irrational: The Hidden Forces That Shape Our Decisions by Dan Ariely.