4 ms·
If we were omniscient and could tell who would pay back their credit, and who wouldn't we could do this. If we're not omniscient, the best we can do is put peo
by tjic 17y ago
If we were omniscient and could tell who would pay back their credit, and who wouldn't we could do this.
If we're not omniscient, the best we can do is put people in bins: "99% of the people in this bin will pay back their debt in full ...but only 65% of the people in this bin will pay their debt in full".
So...what do we do with people who are in the 65% bin?
Do we cut off ALL of them from access to credit?
Or do we give them access to credit, but at higher interest rates?
Personally, I don't think that someone X who shares demographic traits with someone else Y who will not pay his debt should be punished by lack of access to credit.
- philwelch 17y agoI wouldn't base it on demographics, either, just personal credit history. If you don't want to let people borrow themselves into servitude, then people without reliable credit history shouldn't be given credit cards. If you can't get a creditworthy person to co-sign liability for you, go without. There are other sources of credit if you really need them, and yes they are expensive, but they have a limited impact. Conversely, if you do give credit cards to just about anyone, then you shouldn't have sympathy for them if they borrow themselves into servitude.
- tptacek 17y agoYou are being a message board geek. It's ok. It happens to all of us. But: (a) We don't need to be omniscient to know that giving a no-doc zero-down mortgage to someone making $30k a year is a bad plan, or that it makes no fiscal sense to let people take out HELOCs on their houses that can only be paid back if the house appreciates 5+N% year over year. (b) In the real world outside this message board, lenders are actually employing intelligence in the exact opposite direction, optimizing lending to capture people who will pay more in interest and penalties than they will in principal.