5 ms·

Yes, if you want to borrow money, the person loaning you money is generally going to insist that you opt into the system that helps them understand if you are a

by harryh 7y ago

Yes, if you want to borrow money, the person loaning you money is generally going to insist that you opt into the system that helps them understand if you are a good credit risk or not. That's not an unfair request on their part. Don't want to participate? Then don't ask for a loan.

b_tterc_p 7y ago
Just be rich!
- tbyehl 7y ago
  Rich people depend on credit more than anyone. They call it 'leverage.'
Lownin 7y ago
We're told from an early age that we need to be college educated to be economically viable in the world of today and tomorrow. This may or may not be true, but public schools put a non-trivial amount of effort into convincing us it is. Most of us need loans to go to college. To me, this feels like a form of coercion to enter the credit system, either by way of economic realities, or heavy marketing to young people who are not equipped to defend against it.
harry8 7y ago
A genuine alternative is to be able take your custom to one of the MANY other providers who aren't forcing you agree to conditions that are ridiculous. As soon as there is no alternative it's an industry cartel and we need to look at regulating. What is appropriate to determine credit worthiness? How about a blood sample? How much melanin do you have? Who did you vote for and we'll need that verified with a photo of your ballot. There's a million more totally unreasonable ways of determining your credit worthiness, some legal, some not but should be and you would choose not to submit if you could. You have agree to pay interest, on time and pay the loan back. -- ok that's not something you can reasonably opt out of and hope to get a loan. You have to agree to to have your life ruined on a whim or by incompetence because you borrowed $1k and paid it back in full with the interest? -- no, definitely not ok. In between the extremes are all the cases that need looking at. This is a standard case of market failure where you as a consumer have zero market power to effect your preference and your preference is more than reasonable. The GFC was one occasion where such a market failure really came home to roost. There are others, some are trivial, some are huge, most in between. Where it can ruin your life, utterly needlessly and the lives of others, possibly systemically across the whole economy, we tend to want to regulate it so that doesn't happen. There are many such examples in finance which is why we have regulated it in so many ways for so long. Sometimes the regulation will be effective, sometimes not, sometimes it will be fair, sometimes not, sometimes it will be captured by the powerful, hopefully mostly not. Without it, eh, we head for some big trouble, at worst class and civil warfare. (Separate but somewhat related note: "You need to agree to all future changes to this contract by your counter-party in all circumstances" - OH HELL NO that's not ok and should not be considered remotely legal, yet there it is in every single click through you've ever bothered to read and fail to understand on the internet because the click throughs (not contracts for mine) are simply not capable of being understood without the assistance of layers of courts, lawyers and judges - the law on them is not settled anywhere on earth as far as I'm aware. Unconscionable conduct in such things is the norm, pretending otherwise is silly no matter how libertarian I want to be about it and life in general.)
- harryh 7y ago
  it's an industry cartel and we need to look at regulating There are ALL KINDS of regulations around banking and credit reporting. All of the wacky things you mention are already not allowed.
  - harry8 7y ago
    no, not all things that are wacky are disallowed and that's the point. I chose examples that are hard to disagree with to show why regulation is already used and is necessary in the presence of market failure. This is market failure, clearly. You can't take your business elsewhere if you don't like the provisions on account of the fact that they ARE wacky. You can't renegotiate wacky contract provisions. Market failure.
djsumdog 7y ago
There aren't any other options though. No one is going to set you red-line their contracts. No one. I have personally walked away from work agreements for jobs when they wouldn't remove non-compete clauses, but not everyone has that option. There is no "meeting of the minds" here in any real sense.
- harryh 7y ago
  You wouldn't expect to be able to redline the part of a loan contract where you have to pay the money back. This is similar to that. Just because you don't have options to cut essential parts of the contract out doesn't mean there is no "meeting of the minds."
AnthonyMouse 7y ago
> Yes, if you want to borrow money, the person loaning you money is generally going to insist that you opt into the system that helps them understand if you are a good credit risk or not. That's not really what they care about. They don't even get to choose whether you previously borrowed money only from people who agreed not to report anything to Equifax et al. What they really want is to be able to inform on you to their competitors as leverage in getting you to do what they want, like pay false charges instead of disputing them because then you refusing to pay them allows them to ding your credit score. Which in turn raises the interest rates on all your existing variable rate debt and can put your whole life into a downward spiral. Whereas without it, lenders would be more wary to lend money, but that would be true universally. So the result would be that things like housing and education would be more affordable because it wouldn't be so easy for everyone to borrow money and bid up the prices, and people wouldn't be paying such a high percentage of their salary for loan interest. Which leads to the conclusion that the whole system is corrosive and we would be better off without it. > Don't want to participate? Then don't ask for a loan. It's a collective action problem. Everyone is better off if nobody takes a loan to buy a house and then the same people get the same houses but everybody pays less, but if you refuse the loan and the competing buyer doesn't, who gets the house?
- sokoloff 7y ago
  Existing land owners, home builders, and mortgage lenders are most certainly not better off if people only buy houses with cash. I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely.
  - AnthonyMouse 7y ago
    > Existing land owners, home builders, and mortgage lenders are most certainly not better off if people only buy houses with cash. The existing land owners are probably the biggest real opposition now, though they wouldn't be any worse off if we had done the right thing to begin with, because then they'd have paid less from the start too. It could be worth a one-time cost of paying them off in some way. It's debatable whether the home builders would actually be worse off, because most of what people are really bidding up is the land, since construction has a lot more supply elasticity than land. They may even get more work in the long term as people aren't paying loan interest as much, so they ultimately end up with more money that can be used for home improvement projects. And I don't think people have a lot of sympathy for the plight of the mortgage lenders. > I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely. Why would it do that? There would still be the same amount of land, so approximately the same people would have it. If it costs less by the same amount as the credit which is no longer available, the main difference is the interest you're no longer paying to the bank. If anything that should benefit people at the bottom of the ladder, who would have had to take loans with higher than average interest rates.
jakelazaroff 7y ago
> Don't want to participate? Then don't ask for a loan. This is not pragmatic advice. I needed to take out loans to go to college. My phone company did a credit check before they'd let me sign up for a plan. So did my landlord before they offered me a lease. When I buy a car or apply for a mortgage on a house, they'll also check my credit. This system is deeply ingrained in our society; there's not really a way to opt out and still have a relatively normal life.
- kd5bjo 7y ago
  > This system is deeply ingrained in our society; there's not really a way to opt out and still have a relatively normal life. And this is what needs to change. I’ve known many successful people that moved to the US and then had problems getting services because they had no “credit history”.
souterrain 7y ago
What's unfair is the pretense that this is a market transaction between two equal parties. The "person" loaning the money is quite frequently a large corporation with access to resources allowing them to leverage the credit bureau system and the legal system to achieve an outcome in their favor. Most consumer borrowers don't have the resources to retain counsel or sue.
seandougall 7y ago
> Then don't ask for a loan. Translation: Don't participate in the economy unless you're independently wealthy. Conveniently left out: Don't ever apply to rent a house or an apartment. Instead, buy a home. In cash, of course, because you're independently wealthy. Oh, and also: Don't apply for a job. Because, you know, independently wealthy and all that. The idea that non-participation in the credit racket is anything but an exercise in extreme economic privilege is laughable.
- Sacho 7y ago
  Er... this is exactly how it works in developing / third-world countries. My parents managed to obtain a loan for their first apartment thanks to my grandparents offering their house as colllateral. This is how pretty much everyone from my parents' generation got their first apartment. Credit pretty much didn't exist in my parents' generation - loans were generally reserved for houses and cars, because of the strict conditions. Everyone saved up lump sums and paid cash. It's ineffficient, but far from "not participating in the economy". It may be possible to negotiate different conditions on receiving credit, but I don't know if you can demand a modern economy without any drawbacks.
  - maehwasu 7y ago
    It's difficult to participate in an economy like the US where the prices of home purchases (and, by extension, rents), are driven up by competing buyers who have access to copious amounts of cheap credit.
  - mattacular 7y ago
    That is hardly relevant to this discussion about modern United States economy and society. Your story even involves needing grandparents who own property to use as collateral.
    - Spivak 7y ago
      I think it's a good argument that you shouldn't need to do this but like everyone my age got their first car loan and apartment with their parents cosigning. It's super relevant to the the US economy today. It's possible to get credit without someone else but you'll get an absolutely terrible interest rate -- if you have someone in your life with good credit that trusts you (like family) you're leaving money on the table by not 'borrowing' their good credit.
goatinaboat 7y ago
Don't want to participate? Then don't ask for a loan. The Bible tells us that Jesus drove the money-lenders out of the temple. Which means that loans predate credit reference agencies by thousands of years. Therefore we have historical record that they are superfluous.
- smegger001 7y ago
  Actually it was money changers not lenders. The temple in Jerusalem had its own currency separate from the local and Roman currencies and all purchases around the temple required its use. It was essentially a a mix of extortion and racketeering, where if the people wanted to fallow their religion and fulfil their religious obligations they had to buy sacrifices (sheep, oxen or doves depending) from the temple in temple money which had a horrible exchange rate. Technically the people could bring their own but if they did that it had to be inspected approved to be healthy clean etc, and if it didn't meet standards it could not be used as a sacrifice. However The temple would buy it off at a cut rate as it has obviously inferior...

by harryh 7y ago

b_tterc_p 7y ago

Just be rich!

tbyehl 7y ago
Rich people depend on credit more than anyone. They call it 'leverage.'

Lownin 7y ago

We're told from an early age that we need to be college educated to be economically viable in the world of today and tomorrow. This may or may not be true, but public schools put a non-trivial amount of effort into convincing us it is. Most of us need loans to go to college. To me, this feels like a form of coercion to enter the credit system, either by way of economic realities, or heavy marketing to young people who are not equipped to defend against it.

harry8 7y ago

A genuine alternative is to be able take your custom to one of the MANY other providers who aren't forcing you agree to conditions that are ridiculous. As soon as there is no alternative it's an industry cartel and we need to look at regulating. What is appropriate to determine credit worthiness? How about a blood sample? How much melanin do you have? Who did you vote for and we'll need that verified with a photo of your ballot. There's a million more totally unreasonable ways of determining your credit worthiness, some legal, some not but should be and you would choose not to submit if you could. You have agree to pay interest, on time and pay the loan back. -- ok that's not something you can reasonably opt out of and hope to get a loan. You have to agree to to have your life ruined on a whim or by incompetence because you borrowed $1k and paid it back in full with the interest? -- no, definitely not ok. In between the extremes are all the cases that need looking at. This is a standard case of market failure where you as a consumer have zero market power to effect your preference and your preference is more than reasonable. The GFC was one occasion where such a market failure really came home to roost. There are others, some are trivial, some are huge, most in between. Where it can ruin your life, utterly needlessly and the lives of others, possibly systemically across the whole economy, we tend to want to regulate it so that doesn't happen. There are many such examples in finance which is why we have regulated it in so many ways for so long. Sometimes the regulation will be effective, sometimes not, sometimes it will be fair, sometimes not, sometimes it will be captured by the powerful, hopefully mostly not. Without it, eh, we head for some big trouble, at worst class and civil warfare. (Separate but somewhat related note: "You need to agree to all future changes to this contract by your counter-party in all circumstances" - OH HELL NO that's not ok and should not be considered remotely legal, yet there it is in every single click through you've ever bothered to read and fail to understand on the internet because the click throughs (not contracts for mine) are simply not capable of being understood without the assistance of layers of courts, lawyers and judges - the law on them is not settled anywhere on earth as far as I'm aware. Unconscionable conduct in such things is the norm, pretending otherwise is silly no matter how libertarian I want to be about it and life in general.)

harryh 7y ago
it's an industry cartel and we need to look at regulating There are ALL KINDS of regulations around banking and credit reporting. All of the wacky things you mention are already not allowed.
- harry8 7y ago
  no, not all things that are wacky are disallowed and that's the point. I chose examples that are hard to disagree with to show why regulation is already used and is necessary in the presence of market failure. This is market failure, clearly. You can't take your business elsewhere if you don't like the provisions on account of the fact that they ARE wacky. You can't renegotiate wacky contract provisions. Market failure.

djsumdog 7y ago

There aren't any other options though. No one is going to set you red-line their contracts. No one. I have personally walked away from work agreements for jobs when they wouldn't remove non-compete clauses, but not everyone has that option. There is no "meeting of the minds" here in any real sense.

harryh 7y ago
You wouldn't expect to be able to redline the part of a loan contract where you have to pay the money back. This is similar to that. Just because you don't have options to cut essential parts of the contract out doesn't mean there is no "meeting of the minds."

AnthonyMouse 7y ago

> Yes, if you want to borrow money, the person loaning you money is generally going to insist that you opt into the system that helps them understand if you are a good credit risk or not. That's not really what they care about. They don't even get to choose whether you previously borrowed money only from people who agreed not to report anything to Equifax et al. What they really want is to be able to inform on you to their competitors as leverage in getting you to do what they want, like pay false charges instead of disputing them because then you refusing to pay them allows them to ding your credit score. Which in turn raises the interest rates on all your existing variable rate debt and can put your whole life into a downward spiral. Whereas without it, lenders would be more wary to lend money, but that would be true universally. So the result would be that things like housing and education would be more affordable because it wouldn't be so easy for everyone to borrow money and bid up the prices, and people wouldn't be paying such a high percentage of their salary for loan interest. Which leads to the conclusion that the whole system is corrosive and we would be better off without it. > Don't want to participate? Then don't ask for a loan. It's a collective action problem. Everyone is better off if nobody takes a loan to buy a house and then the same people get the same houses but everybody pays less, but if you refuse the loan and the competing buyer doesn't, who gets the house?

sokoloff 7y ago
Existing land owners, home builders, and mortgage lenders are most certainly not better off if people only buy houses with cash. I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely.
- AnthonyMouse 7y ago
  > Existing land owners, home builders, and mortgage lenders are most certainly not better off if people only buy houses with cash. The existing land owners are probably the biggest real opposition now, though they wouldn't be any worse off if we had done the right thing to begin with, because then they'd have paid less from the start too. It could be worth a one-time cost of paying them off in some way. It's debatable whether the home builders would actually be worse off, because most of what people are really bidding up is the land, since construction has a lot more supply elasticity than land. They may even get more work in the long term as people aren't paying loan interest as much, so they ultimately end up with more money that can be used for home improvement projects. And I don't think people have a lot of sympathy for the plight of the mortgage lenders. > I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely. Why would it do that? There would still be the same amount of land, so approximately the same people would have it. If it costs less by the same amount as the credit which is no longer available, the main difference is the interest you're no longer paying to the bank. If anything that should benefit people at the bottom of the ladder, who would have had to take loans with higher than average interest rates.

jakelazaroff 7y ago

> Don't want to participate? Then don't ask for a loan. This is not pragmatic advice. I needed to take out loans to go to college. My phone company did a credit check before they'd let me sign up for a plan. So did my landlord before they offered me a lease. When I buy a car or apply for a mortgage on a house, they'll also check my credit. This system is deeply ingrained in our society; there's not really a way to opt out and still have a relatively normal life.

kd5bjo 7y ago
> This system is deeply ingrained in our society; there's not really a way to opt out and still have a relatively normal life. And this is what needs to change. I’ve known many successful people that moved to the US and then had problems getting services because they had no “credit history”.

souterrain 7y ago

What's unfair is the pretense that this is a market transaction between two equal parties. The "person" loaning the money is quite frequently a large corporation with access to resources allowing them to leverage the credit bureau system and the legal system to achieve an outcome in their favor. Most consumer borrowers don't have the resources to retain counsel or sue.

seandougall 7y ago

> Then don't ask for a loan. Translation: Don't participate in the economy unless you're independently wealthy. Conveniently left out: Don't ever apply to rent a house or an apartment. Instead, buy a home. In cash, of course, because you're independently wealthy. Oh, and also: Don't apply for a job. Because, you know, independently wealthy and all that. The idea that non-participation in the credit racket is anything but an exercise in extreme economic privilege is laughable.

Sacho 7y ago
Er... this is exactly how it works in developing / third-world countries. My parents managed to obtain a loan for their first apartment thanks to my grandparents offering their house as colllateral. This is how pretty much everyone from my parents' generation got their first apartment. Credit pretty much didn't exist in my parents' generation - loans were generally reserved for houses and cars, because of the strict conditions. Everyone saved up lump sums and paid cash. It's ineffficient, but far from "not participating in the economy". It may be possible to negotiate different conditions on receiving credit, but I don't know if you can demand a modern economy without any drawbacks.
- maehwasu 7y ago
  It's difficult to participate in an economy like the US where the prices of home purchases (and, by extension, rents), are driven up by competing buyers who have access to copious amounts of cheap credit.
- mattacular 7y ago
  That is hardly relevant to this discussion about modern United States economy and society. Your story even involves needing grandparents who own property to use as collateral.
  - Spivak 7y ago
    I think it's a good argument that you shouldn't need to do this but like everyone my age got their first car loan and apartment with their parents cosigning. It's super relevant to the the US economy today. It's possible to get credit without someone else but you'll get an absolutely terrible interest rate -- if you have someone in your life with good credit that trusts you (like family) you're leaving money on the table by not 'borrowing' their good credit.

goatinaboat 7y ago

Don't want to participate? Then don't ask for a loan. The Bible tells us that Jesus drove the money-lenders out of the temple. Which means that loans predate credit reference agencies by thousands of years. Therefore we have historical record that they are superfluous.

smegger001 7y ago
Actually it was money changers not lenders. The temple in Jerusalem had its own currency separate from the local and Roman currencies and all purchases around the temple required its use. It was essentially a a mix of extortion and racketeering, where if the people wanted to fallow their religion and fulfil their religious obligations they had to buy sacrifices (sheep, oxen or doves depending) from the temple in temple money which had a horrible exchange rate. Technically the people could bring their own but if they did that it had to be inspected approved to be healthy clean etc, and if it didn't meet standards it could not be used as a sacrifice. However The temple would buy it off at a cut rate as it has obviously inferior...