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Having known lots of people in the lending industry not a single one of them believes that the current credit rating system (with many I’ve talked to pointing o

Having known lots of people in the lending industry not a single one of them believes that the current credit rating system (with many I’ve talked to pointing out FICO in particularly) had any real net positive impact on the average person not so they seem to believe that banks or other lending institutions have derived any other even fit than a loophole for setting interest rates high for as many people as possible. I think we should just go back to what we did before credit ratings, which was basically best due diligence and requiring just a little bit more documentation for a loan application I also think in lieu of this the government can be a net positive here. In the EU this is the norm from what I understand

solipsism 7y ago
a loophole for setting interest rates high for as many people as possible. This makes no sense. Banks can set whatever interest rate they want. It's in their best interest to give trustworthy people as low as interest rate as they can.
- no_wizard 7y ago
  Actually the rate was capped until the supreme ruled otherwise https://www.creditcards.com/credit-card-news/marquette-interest-rate-usury-laws-credit-cards-1282.php https://www.creditcards.com/credit-card-news/marquette-inter... Traditionally there were hard ceilings on acceptable interest rates in most circumstances. After the Supreme Court ruling however this was no longer the case as companies could setup shop in a friendly state that had high interest rate ceilings. This is the reason so many lending outfits are based in South Dakota (on paper at least) as they were the first state that took advantage of this. Now when FICO became a thing in 1989 it’s one expressive goal was to maximize this opportunity to give lenders an optimal (e.g highest) rates they could charge customers for their loans. It doesn’t help the consumer at all in this regard.
randycupertino 7y ago
Having worked as an apartment manager, I can say that credit ratings were the single best factor for selecting a good tenant. I gave three tenants with bad credit a shot (single mom I felt bad for, blue color couple who seemed really nice and hardworking at screening and a couple who moved from abroad and had no credit at all) and I got burned by all of them ending up missing rent and needing to evict, sob stories and late rent, or causing other problems and fighting with their neighbors. After those experiences I basically only selected people above 750 to for our units and it always seemed like the higher the credit score yielded us responsible tenants who paid on time, didn't cause headaches at the building and left their units in good condition when they moved out. As an aside, one interesting thing I noticed over the years fielding applications for open units, EVERY single person in the world who has bad credit or subpar credit apparently has the same psycho ex. It was rather amusing hearing that story over and over again. If you have poor credit and you're trying to rent a place- own up to it and be honest about why it's bad!
- no_wizard 7y ago
  Makes sense since those with that kind of rate tend to be people with their lives a little more out together. Not to dismiss the point though, but it’s also extremely anecdotal. I don’t know that it would actually hold true statistically that this would be the majority case. Escpially given I myself have been under 750 and I have never had these issues

solipsism 7y ago

a loophole for setting interest rates high for as many people as possible. This makes no sense. Banks can set whatever interest rate they want. It's in their best interest to give trustworthy people as low as interest rate as they can.

no_wizard 7y ago
Actually the rate was capped until the supreme ruled otherwise https://www.creditcards.com/credit-card-news/marquette-interest-rate-usury-laws-credit-cards-1282.php https://www.creditcards.com/credit-card-news/marquette-inter... Traditionally there were hard ceilings on acceptable interest rates in most circumstances. After the Supreme Court ruling however this was no longer the case as companies could setup shop in a friendly state that had high interest rate ceilings. This is the reason so many lending outfits are based in South Dakota (on paper at least) as they were the first state that took advantage of this. Now when FICO became a thing in 1989 it’s one expressive goal was to maximize this opportunity to give lenders an optimal (e.g highest) rates they could charge customers for their loans. It doesn’t help the consumer at all in this regard.

randycupertino 7y ago

Having worked as an apartment manager, I can say that credit ratings were the single best factor for selecting a good tenant. I gave three tenants with bad credit a shot (single mom I felt bad for, blue color couple who seemed really nice and hardworking at screening and a couple who moved from abroad and had no credit at all) and I got burned by all of them ending up missing rent and needing to evict, sob stories and late rent, or causing other problems and fighting with their neighbors. After those experiences I basically only selected people above 750 to for our units and it always seemed like the higher the credit score yielded us responsible tenants who paid on time, didn't cause headaches at the building and left their units in good condition when they moved out. As an aside, one interesting thing I noticed over the years fielding applications for open units, EVERY single person in the world who has bad credit or subpar credit apparently has the same psycho ex. It was rather amusing hearing that story over and over again. If you have poor credit and you're trying to rent a place- own up to it and be honest about why it's bad!

no_wizard 7y ago
Makes sense since those with that kind of rate tend to be people with their lives a little more out together. Not to dismiss the point though, but it’s also extremely anecdotal. I don’t know that it would actually hold true statistically that this would be the majority case. Escpially given I myself have been under 750 and I have never had these issues