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> Poor, in debt, barely making ends meet? You're lucky if you can get a credit card for under 30% APR. What about that doesn't make sense? The person you descr
by wyager 10y ago
> Poor, in debt, barely making ends meet? You're lucky if you can get a credit card for under 30% APR.
What about that doesn't make sense? The person you described carries an incredibly high default risk.
If credit scores are unfair to the poor, it's because they don't provide accessible way to fix errors. If your credit score is low because you're in excessive debt and unlikely to pay it off, then the credit scoring system is doing its job.
- sbov 10y agoI don't think they're saying it doesn't make sense. The point is, we help those that don't need help, and hurt those that are already hurting. We give better rates to people with high credit scores, but people with low ones probably need it more. It can turn into a feedback loop where the only way out is some form of outside help.
- wyager 10y agoCredit scores are not a charity mechanism; they are a way of estimating someone's default risk. People with low credit scores don't get high loan rates because their credit scores are low; they get high loan rates because they're probably extremely risky borrowers. If you want to help poor people, the way to do that is not to ask banks to take on irrational risk for no good reason. In fact, making loans more accessible to people who are in bad debt might actually be actively bad for them.
- sbov 10y agoThey are generally just as accessible to people, just at a higher APR. Certain states passed predatory lending laws a long time ago but the US federal government smacked them down. There's a reason why all the national credit card companies have their headquarters in the same couple of states. Beyond that, credit cards can adjust the APR on existing balances.