6 ms·

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 trustin

by 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.

by 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.