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> If those companies' products are no longer a reliable predictor, they shouldn't use them. I think this is very optimistic. It's hard for me to imagine a situ
by cmiles74 9y ago
> If those companies' products are no longer a reliable predictor, they shouldn't use them.
I think this is very optimistic. It's hard for me to imagine a situation in which lenders are questioning the reliability of these credit reports and the only scenario I can come up with is one in which the reporting agency are over-estimating people's ability to reliably repay debt to the point where the lenders are losing so much money that they actually notice. Given that most consumers complain that these reports include erroneous /negative/ information, this scenario seems unlikely.
Lenders will continue to use these reporting companies, no matter how poor their product, because there is no measure against which to judge their product except each other. They'll continue to use them out of inertia, out of erring on the side of caution, and because this is the way they have always done business.
- stult 9y agoWell, I guess the sticking point is that no one has found a better way to measure loan risk. If they had, lenders would work with the agency that more accurately assesses their risk because otherwise they are leaving money on the table by not lending to creditworthy individuals.
- cmiles74 9y agoAgreed. As long as credit reporting companies report conservative numbers and lenders err on the side of minimizing risk, all of the potential lost dollars will fall into the "loans I could've made money on but decided not to loan out" category and that is difficult to gauge.
- rectang 9y ago> no one has found a better way to measure loan risk. Or rather, that the system which measures loan risk is feasible only because the parasitical entities which run it push the massive negative externalities onto the general population. If the loan risk system actually had to pay for all the harm it does, it would be a loser.