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Would it not end up penalizing the exceptions? I have a friend who grew up in a ghetto area. Most of the kids in his neighborhood didn't do much AFAIK. If it wa

Would it not end up penalizing the exceptions? I have a friend who grew up in a ghetto area. Most of the kids in his neighborhood didn't do much AFAIK. If it was assumed he would behave like the average person of his neighborhood he might not have made it out.

zeveb 11y ago
> Would it not end up penalizing the exceptions? Yup, but so too do credit scores in general. If Harry was unlucky, lost his job and missed a few credit-card payments, then his credit card will suffer regardless of whether he is now actually likely to default; the trouble is that he is the type of person who will default. It's unfortunate, but that's what happens whenever one tries to categorize people. And it's unavoidable, even with extensive work in-person, as anyone who's ever been deeply disappointed or pleasantly surprised by a family member or close friend can tell. If Pete couldn't tell that his brother would steal his car, can he really be certain that a stranger won't default on his loan? All any of us can do is play the probabilities.
- sksk 11y ago
  >> Yup, but so too do credit scores in general. If Harry was unlucky, lost his job and missed a few credit-card payments, then his credit card will suffer regardless of whether he is now actually likely to default While it is true but that's completely under Harry's control. Consumer unsecured credit is a volume game so it is not going to be possible to underwrite based on personal history. So you need to look at the historical behavior of similar people and the data will show he has a higher risk of default. That said, Harry can definitely improve this situation by getting a secured credit card from a credit union and build his credit back up. However, if he gets dinged for his friend, he has no way out of it without unfriending everyone from his prior life on Facebook. Lending can be more personal but the economics of unsecured lending makes this challenging. Credit unions get closest to this but the smaller ones who can provide such a service are struggling.
rmah 11y ago
Yes it would penalize the exceptions. The banks do not care about that. They care about measuring the effects of peers on typical people.
- TheCoelacanth 11y ago
  Which is why we have laws. This seems to be pretty clearly illegal, at least if applied to housing loans.
differentView 11y ago
This would reduce exceptions.

zeveb 11y ago

> Would it not end up penalizing the exceptions? Yup, but so too do credit scores in general. If Harry was unlucky, lost his job and missed a few credit-card payments, then his credit card will suffer regardless of whether he is now actually likely to default; the trouble is that he is the type of person who will default. It's unfortunate, but that's what happens whenever one tries to categorize people. And it's unavoidable, even with extensive work in-person, as anyone who's ever been deeply disappointed or pleasantly surprised by a family member or close friend can tell. If Pete couldn't tell that his brother would steal his car, can he really be certain that a stranger won't default on his loan? All any of us can do is play the probabilities.

sksk 11y ago
>> Yup, but so too do credit scores in general. If Harry was unlucky, lost his job and missed a few credit-card payments, then his credit card will suffer regardless of whether he is now actually likely to default While it is true but that's completely under Harry's control. Consumer unsecured credit is a volume game so it is not going to be possible to underwrite based on personal history. So you need to look at the historical behavior of similar people and the data will show he has a higher risk of default. That said, Harry can definitely improve this situation by getting a secured credit card from a credit union and build his credit back up. However, if he gets dinged for his friend, he has no way out of it without unfriending everyone from his prior life on Facebook. Lending can be more personal but the economics of unsecured lending makes this challenging. Credit unions get closest to this but the smaller ones who can provide such a service are struggling.

rmah 11y ago

Yes it would penalize the exceptions. The banks do not care about that. They care about measuring the effects of peers on typical people.

TheCoelacanth 11y ago
Which is why we have laws. This seems to be pretty clearly illegal, at least if applied to housing loans.

differentView 11y ago

This would reduce exceptions.