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I wonder as well. I think we all forget how important credit reports are in giving banks comfort to lend (not that this is the only way to do it, but it seems

I wonder as well. I think we all forget how important credit reports are in giving banks comfort to lend (not that this is the only way to do it, but it seems that this is the current way). If people can default on a uncollateralized loan with no ramifications, no bank would lend and the credit engine would shut down.

hedora 9y ago
People also forget about of rule of law. I defaulted on my loan? Sue me. Want to give me a loan? Search for me in public court records.
- ryeguy_24 9y ago
  If you think about it from the bank's perspective though, why would they lend you any money if you were likely to default and they would have to sue you to get money back. That would mean that the cost of your loan would go up for them and therefore, your borrowing rate goes up tremendously. Humans don't have an innate right to borrow money. It's a service provided by financial institutions for a fee. I don't think credit reports are the best solution (far from it) but they definitely improve your ability to borrow money, at least if you have a good one. :)
  - alasdair_ 9y ago
    >Humans don't have an innate right to borrow money. It's a service provided by financial institutions for a fee. This would be fine, except those financial institutions get THEIR money from the fed discount window. If their service was entirely private, that would be one thing but having the government involved changes the concept of "rights", especially when the fed loans out money with the express reason that the banks will loan it out in turn.
    - aianus 9y ago
      Their usage of the discount window has to be miniscule compared to customer deposits, no?
      - jessaustin 9y ago
        Over the last decade it's basically their only source of profit.
    - ryeguy_24 9y ago
      Maybe a bit, but banks get a majority of their money from deposits. That's their business. Take deposits (pay low interest) and loan it out (higher interest) with some credit risk. The Fed window is a last reserve to protect them from a run on the bank. They could do their business without the Fed window but with a conservative loan-to-deposit ratio. The government doesn't want that because when a bank goes under, banks stop lending which shuts down the economy.
- pps43 9y ago
  Economies of scale. Pulling a credit score costs about $.30 and takes two seconds. How long will it take to search public court records? Besides, it's not only the bankruptcies that count. Good tradelines are also important, and those are not public.
- astura 9y ago
  Courts don't report when you are habitually 30+ days late on your loan payments but still pay them off. Courts also don't report how much debt you have. It would also not have any positive information about you, like how many loans you've taken out but paid back successfully and on time.

hedora 9y ago

People also forget about of rule of law. I defaulted on my loan? Sue me. Want to give me a loan? Search for me in public court records.

ryeguy_24 9y ago
If you think about it from the bank's perspective though, why would they lend you any money if you were likely to default and they would have to sue you to get money back. That would mean that the cost of your loan would go up for them and therefore, your borrowing rate goes up tremendously. Humans don't have an innate right to borrow money. It's a service provided by financial institutions for a fee. I don't think credit reports are the best solution (far from it) but they definitely improve your ability to borrow money, at least if you have a good one. :)
- alasdair_ 9y ago
  >Humans don't have an innate right to borrow money. It's a service provided by financial institutions for a fee. This would be fine, except those financial institutions get THEIR money from the fed discount window. If their service was entirely private, that would be one thing but having the government involved changes the concept of "rights", especially when the fed loans out money with the express reason that the banks will loan it out in turn.
  - aianus 9y ago
    Their usage of the discount window has to be miniscule compared to customer deposits, no?
    - jessaustin 9y ago
      Over the last decade it's basically their only source of profit.
  - ryeguy_24 9y ago
    Maybe a bit, but banks get a majority of their money from deposits. That's their business. Take deposits (pay low interest) and loan it out (higher interest) with some credit risk. The Fed window is a last reserve to protect them from a run on the bank. They could do their business without the Fed window but with a conservative loan-to-deposit ratio. The government doesn't want that because when a bank goes under, banks stop lending which shuts down the economy.
pps43 9y ago
Economies of scale. Pulling a credit score costs about $.30 and takes two seconds. How long will it take to search public court records? Besides, it's not only the bankruptcies that count. Good tradelines are also important, and those are not public.
astura 9y ago
Courts don't report when you are habitually 30+ days late on your loan payments but still pay them off. Courts also don't report how much debt you have. It would also not have any positive information about you, like how many loans you've taken out but paid back successfully and on time.