I would not loan someone thousands of dollars on a "trust me bro", so I wouldn't expect banks to either. Corruption of the authority judging trustworthiness is bad, but there just needs to be an authority doing this.
The real problem is more likely that wages and living expenses are not in sync, which just fucks over the poor people. Using credit to avoid literally dying on the street is more a symptom of wages making no sense.
It's sad. I don't like it either. I don't trust these people either. Equifax fucked me and millions of others, and I got a check for $5.21. There is no justice and there never will be.
People will tolerate even the harshest laws if they feel like they are applied fairly.
But in this case there is no published rule book, and no published methodology for calculating credit scores. There is not even the most basic transparency.
Don't get me wrong I'd love to see the rule book too. Would you trust the rules though? There will always be the mysterious few with the power. I wish we could just have nice things without corruption :/
The issue is the rules include things like lowered scores after paying off a home loan and companies are using these scores for things that have nothing to do with the likelihood of paying back a loan.
They don’t even do a very good job of what’s intended as people can literally have an 800 score the week before declaring bankruptcy.
>Being bad at that because of inherent inaccuracies in their methodology is a problem.
The parent poster already mentioned that it's "not a crystal ball". It doesn't have to be perfect. Sure, there are some edge cases where it fails, but if it works 99% then it's good enough. On the flip side, do you really want a minority report like system that can predict your future credit with 100% accuracy?
It's also super Kafkaesque, because there is no way for you to know why your score is exactly what it is. There is no published rule book or methodology.
Yep. It’s all a secret. You are measured by an invisible system that you can’t opt-out of, can’t question… oh and just in case you thought you could learn from experience, here comes a newer “version” of the score that determines whether you’re allowed to build equity or whether you’re relegated to paying someone else’s mortgage.
How does “checking if people are credit worthy” reinforce inequity? If you can’t repay, you shouldn’t be taking on debt. If anything it prevents people from taking on debt they can’t afford, stopping them from further inequity.
And you can opt out. Don’t use credit at all. (edit: of course a credit record will still exist, but it won't matter if you don't use credit)
This sounds like a bunch of people complaining “why can’t I just borrow whatever I want without people checking whether I can repay?”
Nope. Whether you use credit or not, the credit bureaus collect information about you and share that with all manner of other companies, including employers.
You seem concerned with a “moral failures” aspect of debt, which doesn’t make for an interesting discussion. If you’re not interested in the complex system of algorithmic finance and its intersection with poverty and generational wealth, I’m not sure there’s much of a discussion here.
I already mentioned that some well paying jobs (the kind that people stuck in debt traps would most benefit from) require an active credit score to obtain. So “not using credit” is not an option. As well, credit is a primary way that the people who hold generational wealth got that wealth. Oh, and they run the system.
You’ve created a straw “poor person” and insist on shadow boxing it. If you ever decide to confront the complex systems that these fellow humans face, I encourage you to read up on the modern credit system. Wikipedia has a good rundown with active sources.
There are no "moral failures" so I'm not sure where that comment comes from.
Either you can pay your debt or not. If you can't, others will use that to infer other things about your suitability for various things like jobs.
The credit score isn't the issue, it's just the medium for transmitting information. Background checks can uncover the exact same issues. I can call your neighbor and ask if what kind of a person you're like and decide not to give you a job based on that answer.
> A reasonable take if you ignore how this system reinforces existing inequality
Sure, it "reinforces existing inequality" but what should we do about it? I'm pretty sure punishing people for stealing stuff "reinforces existing inequality", but does that mean stop doing that? Giving high paying jobs to the most qualified candidate also "reinforces existing inequality", but does that mean we should allocate jobs via lottery? Many things "reinforces existing inequality", but they exist for a reason. "reinforces existing inequality" is just a thought terminating cliche.
> the ways this system is used outside its original scope.
What are some examples?
>Also you have to admit it’s kind of fucked up that there’s no total opt out mechanism.
I mean, you can sort of opt out by refusing to give consent for people to run credit checks on you. The problem is that if you don't they assume you must have terrible credit, so you get denied for a lot of things.
I get what you are saying but you are not the customer. The customers are lenders which rely on these scores to make lending decisions critical to their business.
Presumably these lenders find these scores accurate enough to prevent enough bad loans while not turning away too many credit worthy customers.
That said, obviously the models can be improved with more data. I worked for a lender for a while whose edge was giving people a slightly lower rate (or lending to some folks that just missed the cutoff with other lenders) because we thought our model was a bit more accurate than the credit scores / models used by other lenders.
But even we admitted to ourselves that these were just marginal improvements, by and large the credit score is a super meaningful indicator.
> Presumably these lenders find these scores accurate enough to prevent enough bad loans while not turning away too many credit worthy customers.
And this is precisely the point. If there was an error in your score, you'd have no way of knowing, no reasonable basis for any appeal, and it just sucks to be you. Lenders don't care if individual scores are accurate, they only care about whether they're making more money than they're losing.
It's analogous to doing AI gender prediction: it works fine in the aggregate, but you run into issues at the individual level, and it's the individual's rights that I care about.
// If there was an error in your score, you'd have no way of knowin
I don't think that's true. I remember many years ago getting a free credit report on myself (it may have been a free trial from a monitoring service but I believe you can also just get it from the agencies itself)
You get to see the data that is factored into your score. Anything that majorly dings your credit should be obvious (eg Experian thinks you are delinquent on something that is actually paid off)
I never had to deal with that but likely the error then is with the reporting bank so you call them to fix the issue.
You can know in the most obvious subset of cases of error, but if your score is 573 and it's supposed to be 605, good luck figuring that out.
> Is there a reason you think this isn't possible?
The methodology for the calculation of credit scores is secret. You can't go on the internet and figure out how they do it. They don't tell you, they don't publish it, you can't know. Therefore you don't have the ability to check their work.
I understand what you're saying, I just think it's mainly a contrived scenario. Minute differences in the score (573 vs 605) don't really impact you and there's nobody trying to replicate the calculation to make sure they get whatever it's "supposed to be" - whatever that means.
The more likely scenario where someone is going to troubleshoot is "I paid off all my debts and have a lot of unused credit, how come my score is too low for mortgage lenders to talk to me" - and likely a gross mismatch like that is going to be obvious.
They give you a pretty meaningful guide on what to look for in determining your score [0] that should be enough.
Note, I am not arguing that I think it's good the exact formula is not known, I just think it's not a real problem for either the lenders (who are the ones who actually base their business on this data) or the consumer.
> Minute differences in the score (573 vs 605) don't really impact you
Don't they, though? How do you know? For a person who gets refused access to some important service or product because they're just 1 point under some arbitrary and unknown threshold, yes there's an impact.
Generally credit scores falls in wide bands that give a general credit risk.
573 vs 605 are both very high risk and you’re getting slammed regardless.
The scores are no more arbitrary than the requirement that bankruptcies roll off your score after 7 years. It’s not 6 years, or 6 years and 364 days, it’s 7 years and yes being on either side has a massive impact.
> You can know in the most obvious subset of cases of error, but if your score is 573 and it's supposed to be 605, good luck figuring that out.
Presumably you're talking about the case where somebody never checks their credit report, goes out to get a car loan or whatever, and gets a worse interest rate because there's an error on their report. My question is, what are they supposed to do? They're already required to give you a free report per year. There are various services that give you your score and report for free multiple times per year. I guess a push model would work better, but would you want all the credit bureau to send you a letter to your address on file every time your credit report changes?
>the first thing I'm suggesting they could do is publish their credit scoring methodology
What's that supposed to accomplish? At the end of the day, a credit score is ultimately supposed to tell the lender what % chance you're going to default. Suppose the data is already accurate (remember, you can already request your credit report to check whether it's accurate), what additional value does having the methodology provide? Are you doubting their ability to correctly execute the model? Or do you want to dispute the fact that their model gave you a credit score of 573 when you think it should be 605?
As far as I understand (not a US citizen), the biggest thing people seem to do is:
-get a credit card
-do your normal shopping with it
But this just seems nonsensical to me, sure if you can't pay your shopping cart, a mortgage is very likely a bad idea. But what predictive value is there in this score besides that? For individuals it seems more useful to just ask payslip info instead of some weird arbitrary number to get the feeling if someone can pay you.
Let’s be honest, credit score pretty accurately reflect what they are supposed to measure - credit worthiness.