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The US is as far as I know the only country in the world who have a positive creditscore system. At least in Europe it's mostly based on a negative creditscore

The US is as far as I know the only country in the world who have a positive creditscore system. At least in Europe it's mostly based on a negative creditscore i.e. you are trusted by definition but if you don't pay your bills you end up not being allowed access to credit. In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off. This is obviously to say the least absurdly backwards, but I believe there is a rational explanation and that is that the US is a country of immigration and so you had to find a way to allow foreign people without any history and no reason to trust them.

rco8786 10y ago
I'm curious why you think that is absurdly backwards. Not necessarily disagreeing, but it's not hard to justify wanting to see a history of repayment vs trusting by default.
- ThomPete 10y ago
  It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house. You could instead just look at the history of their debit card usage to figure out whether they are trustworthy. As I said though I understand why they do it, it's just not a very useful model IMHO but because it's big money and it's complex to change it most probably wont for now.
  - gareim 10y ago
    >It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house. I don't think it's backwards. Debt is only a bad thing if you're being irresponsible about it, so it's like a weedout test. In the other system, can you just buy a house on credit with no credit history? If so, I just find that hard to comprehend. Also, re: your comment about foreign people, my dad had no issue with it, but maybe you're saying people that are not yet citizens?
  - deleted 10y ago
    [deleted]
  - dawnerd 10y ago
    I think the way we do it in the states is reasonable enough. I wouldn't expect any person outside of those that are gambling to loan money without building up trust first. If you're making minimum wage and don't have a lot in assets you're not going to have a lot of available credit. A lot of people don't realize this I think but if you hold a balance, especially over whatever percent of your total credit, it hurts. The moment I paid off all my cards my credit score jumped and all my limits increased.
    - ThomPete 10y ago
      It's not reasonable for a very simple reason. A lot of people who aren't good with money end up getting credit anyway. You could learn about peoples financial maturity through simply checking their normal debitcard/bank transactions. Does he/she pay is monthly rent, is he/she constantly hitting zero on their balance etc. None of this require credit card usage.
  - jasonlotito 10y ago
    > It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money Citation required because debt is not the same thing as money, so associating them together like you do with your assertion requires something more than just your illogical statement.
    - ThomPete 10y ago
      It's ironic how completely oblivious many of you are of your own system. I live in the US and I grew up in Denmark. Both systems allowed me to have credit cards, rent apartments, buy a car etc, but only the US system forced me to do that by creating debt to show that I could be trusted with debt. In other words large parts of the world do in fact associate them and aren't like us in the US debt ridden.
  - ArkyBeagle 10y ago
    They don't care if you're "good with money". They care that you can demonstrate a habit of making payments on time.
    - ThomPete 10y ago
      Which is part of being good with money. For instance paying your rent on time. I.e. something that can be proven other ways than using your credit card.
      - ArkyBeagle 10y ago
        Those are all part of your credit score as well. Er, rather any late payments that get reported may be a part of a credit score.
        ThomPete 10y ago
        Yes once you start paying with your credit card that's not the discussion here. The discussion is how to even get a credit card to begin with. Being non-american I went trough this and have a pretty good idea on how it works and some of the myths. I guess some of the confusion is around the before/after a card.
    - Drdrdrq 10y ago
      This. It is also the reason the system seems weird to me - their incentive is not same as mine as a customer.
      - tacostakohashi 10y ago
        It's pretty normal for opposing incentives to exist between customers and providers (counterparties).
  - tedunangst 10y ago
    The trust by default model was tried with driver's licenses. Give one to everybody. Result: lots of accidents. Most states have now switched policies and require a year of driving with a provisional license. Result: fewer accidents. If we want to avoid debt "accidents", only letting people with demonstrated experience seems like a good solution.
    - nickpsecurity 10y ago
      I didn't even hear about that. That's interesting. It reminds me of what we used to joke as solution to reduce malware and bots on the net: license for using a computer online for at least basic, precautionary measures with disconnects or something like that if they do dumb things. Congress still not taking action on that but I'm glad situation with driving improved.
    - nommm-nommm 10y ago
      Good point, when I got my licence the criteria was slightly more than having a pulse. My teenage peers racked up speeding tickets without a slap on the wrist. Nowadays there's all sorts of requirements there wasn't before and if a 16 year old got a speeding ticket it would be a much harsher penality than just paying the fine like you do at 25.
    - dredmorbius 10y ago
      It turns out that age matters a hell of a lot, independent even of experience. Teenagers are horrific insurance risks. A provisional license offers both supervised training and effectively delays entry into the unsupervised insurance pool by a year. After this, location (e.g., ZIP Code, in the US) and miles driven are the biggest predictors. Latter are why insurance companies will do almost anything to get ahold of odometer readings. Source: Worked on auto insurance risk products.
  - saryant 10y ago
    There's absolutely no need to take out a penny in loans to build a credit score. That's a myth.
    - ThomPete 10y ago
      Yet thats exactly what I had to do. I had to basically fund my own credit for some time and pay it off. All which cost money of course. As a foreigner thats how it's normally done. At least in a bank like Citibank.
      - saryant 10y ago
        You can open a secured credit card, never use it and after a year convert it to an unsecured credit card, getting your deposit back. And you would never have been in debt.
        FireBeyond 10y ago
        That's not quite accurate, almost any secured or subprime credit card will have activity requirements. Most will close your account if there's insufficient transactions in the last three months.
        nommm-nommm 10y ago
        Even if they close the account it still "counts" on your credit score for 10 years.
      - maxxxxx 10y ago
        I am foreigner. My first CC had a $49 yearly fee and something like 39% APR. I always paid it off and after a year other offers came. So the cost was $49 to get a credit history.
      - nommm-nommm 10y ago
        1) Get credit card 2) Shred credit card 3) Now you have a credit history (They'll probably close your account in a year of inactivity if you don't use it but you'll still have credit history until the account falls off your report-10 years)
  - twblalock 10y ago
    > It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house. First of all, you can have an excellent credit score without paying a penny of interest. All you have to do is buy things with your credit card, and pay the bill in full when it arrives. You will never pay any interest when you do this. Second, the people who measure risk for a living have determined that people's history with small amounts of debt is indicative of their ability to manage larger amounts of debt. Do you think their actuarial models are incorrect, and if so, why? Furthermore, it's not like a good credit score is all it takes to get a mortgage. Proof of income matters too. As anyone who bought a house since the 2008 debacle will tell you, mortgage lenders take great pains to verify borrowers' income and the source of the money they use for their down payment. > You could instead just look at the history of their debit card usage to figure out whether they are trustworthy. No, you really can't. A debit transaction is a direct deduction of money from a checking account -- it is not debt. The only thing that can go wrong is an overdraft, and even when that happens, the payee will probably be unaware of it. Debit is more similar to cash than it is to credit. People have very different psychology and behavior when they use debt instead of cash. There are plenty of problems with the credit system in the US, but the things you have identified as problems are not real problems.
    - ThomPete 10y ago
      First of all. Yes you can have an excellent credit score without paying a penny of interest, but the second you use it you are by definition in debt. Whether there is interest is besides the point. You can't just decide not to pay it back. And most people don't use it like that which is why it's such a good business. Second it's a fairly know issue that the way creditscore is established is pretty flawed. You can have 10mio on your account, but if you have no job or own your own company it will actually affect your credit score. This whole thread is started because of some of the issues. With regards to the debit card the point is that the kind of purchases you did before you got a credit card, aren't going to change dramatically or fundamentally after you get one.
      - 10y ago
  - syshum 10y ago
    >It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money The American economy, and largely the world economy is based on accusation of debt. If everyone in the US, or other First world nations simply started living with in their means, never incurring debt the entire of the world economy was cease. Thus the credit system is design to reward people that acquire more and more debt and punish people that save or live frugal life styles with in their means The modern economy depends on a person gathering debt from their 18th birthday until their death, where the assets of their life are then sold to cover those debts ensuring the next generation also has to acquire debt repeating the cycle.
cesarb 10y ago
> The US is as far as I know the only country in the world who have a positive creditscore system. They are trying to bring something like that to Brazil too. Fortunately, it's opt-in, at least for now.
jsprogrammer 10y ago
I don't think this is the cause, but it does appear to be a virtuous feedback cycle: the creation of debt must continue for the economy to function. Practically forcing people to create debt allows the system to continue.
superuser2 10y ago
>you are trusted by definition I felt pretty "trusted by definition." Citi gave me a credit card with a $3,000 limit as a college freshmen. A few years later I had an $8,000 limit card and a $10,000 limit card. I bought my car certified-pre-owned under a program that writes favorable low-cost loans to recent college graduates with no or limited credit history (with an offer letter or paystubs). You just aren't trusted with housing-sized amounts of money until you demonstrate responsibility with smaller dollar values first. >basically creating debt and then paying it off This depends on your definitions a little bit. You don't need to carry a balance and you certainly don't need to pay interest. You just need to create low but nonzero utilization on a credit card, pay it off every month, and not do anything else that might screw up your credit. I suppose you have debt in the interim between making the charge and paying it off, but most people don't consider it to be "credit card debt" if it goes away between statement cycles.
- ThomPete 10y ago
  You are american you have a history and your parents have a history. This is not something that you can have different opinions about it's how the US credit history system works by definition. Not saying one is better than the other, it's just how it works in the US.
  - SystemOut 10y ago
    How do my parent's credit history have anything to do with my credit history in the US? Are you talking about co-signing for loans or possibly how a child can get a card under their parents' name? I didn't think either of those had any impact on the child's credit score.
    - TeMPOraL 10y ago
      Given what I hear about US banks, this seems like a most obvious variable to include in computing the credit score. Which leads me to my question - is there an official/exhaustive list of what exactly is considered and how, or is that a banking secret?
zo1 10y ago
It's not the only country in the world to do it. South Africa does it as well. You don't get credit by default, and instead you have to earn it by doing incremental "small" debt-like things. E.g. post-paid telephone accounts, buying small items of furniture on a payment system, etc. Until you do those things, you are most likely going to get denied high-ticket loans such as mortgages and car-financing.
- ThomPete 10y ago
  Ok thanks. Good to know.
lrem 10y ago
It is also present in Ireland and I'd bet in the UK too.
a-saleh 10y ago
I don't think you really are trusted by definition in EU at least when it comes to mortgage, because you need to prove you have stable income, even though they won't lend you the full price of the property you put the mortgage on.
dakial 10y ago
In Brazil one of the credit score agencies is trying to make people opt in into the positive credit score system. It is not working very well...
adrianmacneil 10y ago
NZ and Australia both have positive credit score systems (both introduced in the past 10 years). I wouldn't necessarily agree with a gut reaction that positive credit scores are absurdly backwards. It makes sense that I would trust someone more as a borrower if I know they have repaid debts in the past (versus having no history at all). The system could probably use improvements and more regulation, but I don't think it's fundamentally off base.
- PebblesHD 10y ago
  My only concern with the system is that it treats people with no need or desire to have a credit card as 'risky', even if they have excellent assets and income. I'm personally unable to sign up for a mobile phone plan because I don't have a credit score, yet I rent a home, own a decent car and earn decent money without the need to borrow... This was only an issue because the person rejecting my application was relying on a computer screen to say 'denied' and where there is no room to say 'thats a bit silly'.
ezequiel-garzon 10y ago
I don't know... As a foreign student I was for some reason given some positive credit score. That was surprising enough, but not as surprising as having my credit limit raised very liberally every time I reached it. I can tell you that doesn't happen in Spain at least (and seems in reality more sensible).
nickpsecurity 10y ago
"that is that the US is a country of immigration and so you had to find a way to allow foreign people without any history and no reason to trust them." Remember our banking system in U.S. pays politicians to create laws that benefit them. It's actually not much a stretch to even claim they own the country between ex-bankers doing the regulations, bankers paying off politicians, bankers getting bailouts, the Fed, and bankers obviously controlling financial backbone of economy. So, I always consider whether this could have impacted a law, standard practice, or whatever. Well, one thing they like is you buying stuff with their money and paying interest. It's basically how they all make money outside things like fees and services. Guess what our "backwards" credit system forces us to do. You were absolutely correct if you guessed "guarantee billions in profits for bankers." I'm not sure if they created the original model but it should be on list of possibilities to consider given they pull lots of stuff like this. Another example they probably paid politicians for is how they do tax write-offs on charged-off loans they're not going to collect. The reasonable parts are them not paying taxes on loans they can't collect and borrower paying taxes on amount they borrowed because it's effectively income. The sneaky modification they also write off the interest and fees they charged on top while borrower pays taxes on those as if they were income. Interest and fees certainly aren't income. This scheme works great for banks and IRS but not consumers.
mikeash 10y ago
I don't see what's so strange about this. Let's say you were lending money. Would you prefer to lend it to a person with an established history of taking out and then paying back loans, or a person with zero history either way? I don't think it's accurate to describe the system as starting out not trusted. There are many levels, and misbehavior can easily give you worse credit than the default. You start out neutral and then go up or down depending on what you do. Which seems like exactly how it should be.
- ThomPete 10y ago
  Perhaps it's my English that's just not allowing me to communicate clearly but I think people are missing the point here. There are plenty of other ways to credit companies could gauge inside your economic maturity as much of your financial history have been done via debit card for more or less the same transactions that you are going to use your credit card for. In other words the information is there already because you have been using your debit card already. And yes it is accurate to describe it as not trusted which is why you need to increase your credit score by using your credit and paying it back.
  - mikeash 10y ago
    I don't see how debit card use would get the job done. Those transactions take money directly and immediately from your account. The whole idea of a credit score is to judge your ability to pay money that you owe later on when it's not automatic.
  - nommm-nommm 10y ago
    You know credit score isn't the only thing used in a credit decision, right? On a credit application you are asked about assets, income, amount of rent you pay, and account balances. Credit score is one of many pieces of information used in lending. Alternative credit scores are starting to come on the market for people who pay bills on time but may not otherwise have a traditional credit history but they are pretty experimental still. There's different algorithms too. The current one used most often is FICO 8 but there's a LOT more. Each lender has their target borrower too. Some lenders are what is called subprime lenders meaning they lend to people with low or limited credit histories. Debit card use makes no sense and is irrelevant.
framp 10y ago
> In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off. You have to do the same to get a mortgage in UK. And that's why I need a credit card
flukus 10y ago
> In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off. This seems backwards to me. The proof that I am good with money is that I have never been in debt. When I got my home loan the additional proof was having a deposit.

rco8786 10y ago

I'm curious why you think that is absurdly backwards. Not necessarily disagreeing, but it's not hard to justify wanting to see a history of repayment vs trusting by default.

ThomPete 10y ago
It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house. You could instead just look at the history of their debit card usage to figure out whether they are trustworthy. As I said though I understand why they do it, it's just not a very useful model IMHO but because it's big money and it's complex to change it most probably wont for now.
- gareim 10y ago
  >It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house. I don't think it's backwards. Debt is only a bad thing if you're being irresponsible about it, so it's like a weedout test. In the other system, can you just buy a house on credit with no credit history? If so, I just find that hard to comprehend. Also, re: your comment about foreign people, my dad had no issue with it, but maybe you're saying people that are not yet citizens?
- deleted 10y ago
  [deleted]
- dawnerd 10y ago
  I think the way we do it in the states is reasonable enough. I wouldn't expect any person outside of those that are gambling to loan money without building up trust first. If you're making minimum wage and don't have a lot in assets you're not going to have a lot of available credit. A lot of people don't realize this I think but if you hold a balance, especially over whatever percent of your total credit, it hurts. The moment I paid off all my cards my credit score jumped and all my limits increased.
  - ThomPete 10y ago
    It's not reasonable for a very simple reason. A lot of people who aren't good with money end up getting credit anyway. You could learn about peoples financial maturity through simply checking their normal debitcard/bank transactions. Does he/she pay is monthly rent, is he/she constantly hitting zero on their balance etc. None of this require credit card usage.
- jasonlotito 10y ago
  > It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money Citation required because debt is not the same thing as money, so associating them together like you do with your assertion requires something more than just your illogical statement.
  - ThomPete 10y ago
    It's ironic how completely oblivious many of you are of your own system. I live in the US and I grew up in Denmark. Both systems allowed me to have credit cards, rent apartments, buy a car etc, but only the US system forced me to do that by creating debt to show that I could be trusted with debt. In other words large parts of the world do in fact associate them and aren't like us in the US debt ridden.
- ArkyBeagle 10y ago
  They don't care if you're "good with money". They care that you can demonstrate a habit of making payments on time.
  - ThomPete 10y ago
    Which is part of being good with money. For instance paying your rent on time. I.e. something that can be proven other ways than using your credit card.
    - ArkyBeagle 10y ago
      Those are all part of your credit score as well. Er, rather any late payments that get reported may be a part of a credit score.
      - ThomPete 10y ago
        Yes once you start paying with your credit card that's not the discussion here. The discussion is how to even get a credit card to begin with. Being non-american I went trough this and have a pretty good idea on how it works and some of the myths. I guess some of the confusion is around the before/after a card.
  - Drdrdrq 10y ago
    This. It is also the reason the system seems weird to me - their incentive is not same as mine as a customer.
    - tacostakohashi 10y ago
      It's pretty normal for opposing incentives to exist between customers and providers (counterparties).
- tedunangst 10y ago
  The trust by default model was tried with driver's licenses. Give one to everybody. Result: lots of accidents. Most states have now switched policies and require a year of driving with a provisional license. Result: fewer accidents. If we want to avoid debt "accidents", only letting people with demonstrated experience seems like a good solution.
  - nickpsecurity 10y ago
    I didn't even hear about that. That's interesting. It reminds me of what we used to joke as solution to reduce malware and bots on the net: license for using a computer online for at least basic, precautionary measures with disconnects or something like that if they do dumb things. Congress still not taking action on that but I'm glad situation with driving improved.
  - nommm-nommm 10y ago
    Good point, when I got my licence the criteria was slightly more than having a pulse. My teenage peers racked up speeding tickets without a slap on the wrist. Nowadays there's all sorts of requirements there wasn't before and if a 16 year old got a speeding ticket it would be a much harsher penality than just paying the fine like you do at 25.
  - dredmorbius 10y ago
    It turns out that age matters a hell of a lot, independent even of experience. Teenagers are horrific insurance risks. A provisional license offers both supervised training and effectively delays entry into the unsupervised insurance pool by a year. After this, location (e.g., ZIP Code, in the US) and miles driven are the biggest predictors. Latter are why insurance companies will do almost anything to get ahold of odometer readings. Source: Worked on auto insurance risk products.
- saryant 10y ago
  There's absolutely no need to take out a penny in loans to build a credit score. That's a myth.
  - ThomPete 10y ago
    Yet thats exactly what I had to do. I had to basically fund my own credit for some time and pay it off. All which cost money of course. As a foreigner thats how it's normally done. At least in a bank like Citibank.
    - saryant 10y ago
      You can open a secured credit card, never use it and after a year convert it to an unsecured credit card, getting your deposit back. And you would never have been in debt.
      - FireBeyond 10y ago
        That's not quite accurate, almost any secured or subprime credit card will have activity requirements. Most will close your account if there's insufficient transactions in the last three months.
        nommm-nommm 10y ago
        Even if they close the account it still "counts" on your credit score for 10 years.
    - maxxxxx 10y ago
      I am foreigner. My first CC had a $49 yearly fee and something like 39% APR. I always paid it off and after a year other offers came. So the cost was $49 to get a credit history.
    - nommm-nommm 10y ago
      1) Get credit card 2) Shred credit card 3) Now you have a credit history (They'll probably close your account in a year of inactivity if you don't use it but you'll still have credit history until the account falls off your report-10 years)
- twblalock 10y ago
  > It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house. First of all, you can have an excellent credit score without paying a penny of interest. All you have to do is buy things with your credit card, and pay the bill in full when it arrives. You will never pay any interest when you do this. Second, the people who measure risk for a living have determined that people's history with small amounts of debt is indicative of their ability to manage larger amounts of debt. Do you think their actuarial models are incorrect, and if so, why? Furthermore, it's not like a good credit score is all it takes to get a mortgage. Proof of income matters too. As anyone who bought a house since the 2008 debacle will tell you, mortgage lenders take great pains to verify borrowers' income and the source of the money they use for their down payment. > You could instead just look at the history of their debit card usage to figure out whether they are trustworthy. No, you really can't. A debit transaction is a direct deduction of money from a checking account -- it is not debt. The only thing that can go wrong is an overdraft, and even when that happens, the payee will probably be unaware of it. Debit is more similar to cash than it is to credit. People have very different psychology and behavior when they use debt instead of cash. There are plenty of problems with the credit system in the US, but the things you have identified as problems are not real problems.
  - ThomPete 10y ago
    First of all. Yes you can have an excellent credit score without paying a penny of interest, but the second you use it you are by definition in debt. Whether there is interest is besides the point. You can't just decide not to pay it back. And most people don't use it like that which is why it's such a good business. Second it's a fairly know issue that the way creditscore is established is pretty flawed. You can have 10mio on your account, but if you have no job or own your own company it will actually affect your credit score. This whole thread is started because of some of the issues. With regards to the debit card the point is that the kind of purchases you did before you got a credit card, aren't going to change dramatically or fundamentally after you get one.
    - 10y ago
- syshum 10y ago
  >It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money The American economy, and largely the world economy is based on accusation of debt. If everyone in the US, or other First world nations simply started living with in their means, never incurring debt the entire of the world economy was cease. Thus the credit system is design to reward people that acquire more and more debt and punish people that save or live frugal life styles with in their means The modern economy depends on a person gathering debt from their 18th birthday until their death, where the assets of their life are then sold to cover those debts ensuring the next generation also has to acquire debt repeating the cycle.

cesarb 10y ago

> The US is as far as I know the only country in the world who have a positive creditscore system. They are trying to bring something like that to Brazil too. Fortunately, it's opt-in, at least for now.

jsprogrammer 10y ago

I don't think this is the cause, but it does appear to be a virtuous feedback cycle: the creation of debt must continue for the economy to function. Practically forcing people to create debt allows the system to continue.

superuser2 10y ago

>you are trusted by definition I felt pretty "trusted by definition." Citi gave me a credit card with a $3,000 limit as a college freshmen. A few years later I had an $8,000 limit card and a $10,000 limit card. I bought my car certified-pre-owned under a program that writes favorable low-cost loans to recent college graduates with no or limited credit history (with an offer letter or paystubs). You just aren't trusted with housing-sized amounts of money until you demonstrate responsibility with smaller dollar values first. >basically creating debt and then paying it off This depends on your definitions a little bit. You don't need to carry a balance and you certainly don't need to pay interest. You just need to create low but nonzero utilization on a credit card, pay it off every month, and not do anything else that might screw up your credit. I suppose you have debt in the interim between making the charge and paying it off, but most people don't consider it to be "credit card debt" if it goes away between statement cycles.

ThomPete 10y ago
You are american you have a history and your parents have a history. This is not something that you can have different opinions about it's how the US credit history system works by definition. Not saying one is better than the other, it's just how it works in the US.
- SystemOut 10y ago
  How do my parent's credit history have anything to do with my credit history in the US? Are you talking about co-signing for loans or possibly how a child can get a card under their parents' name? I didn't think either of those had any impact on the child's credit score.
  - TeMPOraL 10y ago
    Given what I hear about US banks, this seems like a most obvious variable to include in computing the credit score. Which leads me to my question - is there an official/exhaustive list of what exactly is considered and how, or is that a banking secret?

zo1 10y ago

It's not the only country in the world to do it. South Africa does it as well. You don't get credit by default, and instead you have to earn it by doing incremental "small" debt-like things. E.g. post-paid telephone accounts, buying small items of furniture on a payment system, etc. Until you do those things, you are most likely going to get denied high-ticket loans such as mortgages and car-financing.

ThomPete 10y ago
Ok thanks. Good to know.

lrem 10y ago

It is also present in Ireland and I'd bet in the UK too.

a-saleh 10y ago

I don't think you really are trusted by definition in EU at least when it comes to mortgage, because you need to prove you have stable income, even though they won't lend you the full price of the property you put the mortgage on.

dakial 10y ago

In Brazil one of the credit score agencies is trying to make people opt in into the positive credit score system. It is not working very well...

adrianmacneil 10y ago

NZ and Australia both have positive credit score systems (both introduced in the past 10 years). I wouldn't necessarily agree with a gut reaction that positive credit scores are absurdly backwards. It makes sense that I would trust someone more as a borrower if I know they have repaid debts in the past (versus having no history at all). The system could probably use improvements and more regulation, but I don't think it's fundamentally off base.

PebblesHD 10y ago
My only concern with the system is that it treats people with no need or desire to have a credit card as 'risky', even if they have excellent assets and income. I'm personally unable to sign up for a mobile phone plan because I don't have a credit score, yet I rent a home, own a decent car and earn decent money without the need to borrow... This was only an issue because the person rejecting my application was relying on a computer screen to say 'denied' and where there is no room to say 'thats a bit silly'.

ezequiel-garzon 10y ago

I don't know... As a foreign student I was for some reason given some positive credit score. That was surprising enough, but not as surprising as having my credit limit raised very liberally every time I reached it. I can tell you that doesn't happen in Spain at least (and seems in reality more sensible).

nickpsecurity 10y ago

"that is that the US is a country of immigration and so you had to find a way to allow foreign people without any history and no reason to trust them." Remember our banking system in U.S. pays politicians to create laws that benefit them. It's actually not much a stretch to even claim they own the country between ex-bankers doing the regulations, bankers paying off politicians, bankers getting bailouts, the Fed, and bankers obviously controlling financial backbone of economy. So, I always consider whether this could have impacted a law, standard practice, or whatever. Well, one thing they like is you buying stuff with their money and paying interest. It's basically how they all make money outside things like fees and services. Guess what our "backwards" credit system forces us to do. You were absolutely correct if you guessed "guarantee billions in profits for bankers." I'm not sure if they created the original model but it should be on list of possibilities to consider given they pull lots of stuff like this. Another example they probably paid politicians for is how they do tax write-offs on charged-off loans they're not going to collect. The reasonable parts are them not paying taxes on loans they can't collect and borrower paying taxes on amount they borrowed because it's effectively income. The sneaky modification they also write off the interest and fees they charged on top while borrower pays taxes on those as if they were income. Interest and fees certainly aren't income. This scheme works great for banks and IRS but not consumers.

mikeash 10y ago

I don't see what's so strange about this. Let's say you were lending money. Would you prefer to lend it to a person with an established history of taking out and then paying back loans, or a person with zero history either way? I don't think it's accurate to describe the system as starting out not trusted. There are many levels, and misbehavior can easily give you worse credit than the default. You start out neutral and then go up or down depending on what you do. Which seems like exactly how it should be.

ThomPete 10y ago
Perhaps it's my English that's just not allowing me to communicate clearly but I think people are missing the point here. There are plenty of other ways to credit companies could gauge inside your economic maturity as much of your financial history have been done via debit card for more or less the same transactions that you are going to use your credit card for. In other words the information is there already because you have been using your debit card already. And yes it is accurate to describe it as not trusted which is why you need to increase your credit score by using your credit and paying it back.
- mikeash 10y ago
  I don't see how debit card use would get the job done. Those transactions take money directly and immediately from your account. The whole idea of a credit score is to judge your ability to pay money that you owe later on when it's not automatic.
- nommm-nommm 10y ago
  You know credit score isn't the only thing used in a credit decision, right? On a credit application you are asked about assets, income, amount of rent you pay, and account balances. Credit score is one of many pieces of information used in lending. Alternative credit scores are starting to come on the market for people who pay bills on time but may not otherwise have a traditional credit history but they are pretty experimental still. There's different algorithms too. The current one used most often is FICO 8 but there's a LOT more. Each lender has their target borrower too. Some lenders are what is called subprime lenders meaning they lend to people with low or limited credit histories. Debit card use makes no sense and is irrelevant.

framp 10y ago

> In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off. You have to do the same to get a mortgage in UK. And that's why I need a credit card

flukus 10y ago

> In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off. This seems backwards to me. The proof that I am good with money is that I have never been in debt. When I got my home loan the additional proof was having a deposit.