9 ms·

The credit system in the US is already a pretty horrific version of this, and nobody really seems to care and it’s been like this for decades. And it’s not even

by cactus2093 6y ago

The credit system in the US is already a pretty horrific version of this, and nobody really seems to care and it’s been like this for decades. And it’s not even just used for credit anymore, renting an apartment now usually requires a credit check. I had thought credit karma and similar services were at least adding transparency to the industry but was recently in for a rude awakening when trying to get preapproval for our first mortgage. It turns out, the whole idea of a credit score is kind of a lie. Your credit report can be pulled by creditors, and creditors can interpret it in different ways as they see fit. Services like credit karma are just making up their own score based on the report which can be drastically different than what the creditor decides it is. And credit pulled for different uses somehow ends up with different scores, e.g. for a credit card approval your score will often show up higher than for a mortgage. You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report. It’s insane and the fact that this fairly old and low-tech institution has not managed to be regulated successfully or made fair to the average person, bodes very poorly IMO for regulation of privacy and fairness based on future technology.

lotsofpulp 6y ago
> You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report. There is no “the credit score”. Any lender is free to use whatever scoring algorithm they like. And they do. Some lenders may choose to use certain scores for certain things, but underwriting has no obligation to use one specific credit score. Therefore there is no reason for people to care about their credit score, whether it be from FICO or credit karma or whoever. The only thing you should do is make sure information on the credit report is accurate. And what is your source for claiming you can pay to get things removed from credit score? It doesn’t even make sense, as it just shows the status of your lines of credit. You can’t just make a line of credit disappear as no credit reporting agency or financial institution is going to want to commit fraud for any amount of money that an average person might offer.
- njarboe 6y ago
  Credit reporting agencies and financial institutions commit fraud all the time. They call it identity theft so that you think it is your fault instead of their fault. No one would care about a bank giving a loan to a person that was impersonating them except for the fact that the bank (credit card, mattress store, car dealership, etc) commits fraud and reports to the credit agency that you have defaulted on your loan when you have not. Then the credit reporting agency also commits fraud when they sell this false and damaging information to others. This is the big lie. That "identity theft" should be the problem of the person who was impersonated. Pass laws that heavily fine entities that give false information to credit bureaus and fine credit bureaus who give out false information. "Identity theft" would no longer be something that people would worry about.
  - lotsofpulp 6y ago
    I agree that the consequences of identity theft should fall on the financial institutions and credit reporting agencies.
  - gruez 6y ago
    >Credit reporting agencies and financial institutions commit fraud all the time. They call it identity theft so that you think it is your fault instead of their fault. No one would care about a bank giving a loan to a person that was impersonating them except for the fact that the bank (credit card, mattress store, car dealership, etc) commits fraud and reports to the credit agency that you have defaulted on your loan when you have not. That's literally what not fraud is. >In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right If some guy walks into a bank and claim they're you and they believe it, the banks aren't gaining anything. If anything, they lost money. Wrongly reporting the default to the CRAs also doesn't benefit them either; it's not like they compensate the banks based on how many default reports they send in. Finally, it's missing the "intentional" part. Lax security practices are negligence at best.
    - bsanr2 6y ago
      >If some guy walks into a bank and claim they're you and they believe it, the banks aren't gaining anything. They would have just sold a loan. >If anything, they lost money. Can't they sell the defaulted loan to collections? >Lax security practices are negligence at best. Systemic, known, and long-standing negligence speaks to intention.
syshum 6y ago
>> And it’s not even just used for credit anymore, renting an apartment now usually requires a credit check. Renting an apartment is credit, I am not sure why you view it has something other than credit? The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments How is that not credit? A better example is employers using it for hiring choices which does happen as well, but using an apartment as an example of bad uses of credit I think it misguided >>. It turns out, the whole idea of a credit score is kind of a lie. Your credit report can be pulled by creditors, and creditors can interpret it in different ways as they see fit. Yes the individual or organization that is loaning you a large amount of money can choose how they use the credit report they obtain for you. Again here I am not sure why this is a revelation or a bad thing. There are also many different and competiting credit scores no person as "a credit score" there are at least 5 if not more credit scores out there and different institutions will use them in different ways. FICO being the most common but not the only >You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report. Yea I believe these institutions should also have to release your personal score with your annual free report, Congress should fix that omission from the law.
- gruez 6y ago
  >Renting an apartment is credit, I am not sure why you view it has something other than credit? >The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments Not really. In most places you have to pay first and last month's rent, which means you're paying for the service before it's rendered. Therefore they're not extending credit, as you have already paid for the service in advance.
  - syshum 6y ago
    Well there are a few problems with this 1. I would like you to define "most places" as for the first 35 years of my life I was a renter and in that time I only ever had to pay "First and last" in one instance. Most of the time it was The first months rent, and security deposit(which was often something small like $100 or $200), no "last months rent" so around here it was not "most places" 2. Even if you use that as a metric that is more like a down payment than a "services paid in advance", unless you are on some kind of month to month with no lease. Every lease I have ever signed shows the TOTAL of all payments which are paid in 12 installments just like a loan, if on month 6th you just move well you still owe the other 6 payments (less any down payment aka last month you prepaid) The owner is absolutely extending you credit for the use of the property, If you sign a lease for an apartment for $1,500 a month for 12 months you are agreeing to pay $18,000 to the owner for the use of the property, you have both agreed to pay that over 12 equal payments, and in your hypothetical the owner has asked for a $3,000 down payment on that loan in exchange the owner adjusted the terms to 10 equal payments
gexla 6y ago
I don't know if this is still the case, but banks at one time would deny you based on poor credit history also. And so, you get to stay in the "unbanked" category which is just another factor which may keep you in poverty. The FinTech industry has since grown to the point that being unbanked doesn't need to be a thing anymore. It's easy to pick up a prepaid debit card which you can receive ACH payments on.

lotsofpulp 6y ago

> You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report. There is no “the credit score”. Any lender is free to use whatever scoring algorithm they like. And they do. Some lenders may choose to use certain scores for certain things, but underwriting has no obligation to use one specific credit score. Therefore there is no reason for people to care about their credit score, whether it be from FICO or credit karma or whoever. The only thing you should do is make sure information on the credit report is accurate. And what is your source for claiming you can pay to get things removed from credit score? It doesn’t even make sense, as it just shows the status of your lines of credit. You can’t just make a line of credit disappear as no credit reporting agency or financial institution is going to want to commit fraud for any amount of money that an average person might offer.

njarboe 6y ago
Credit reporting agencies and financial institutions commit fraud all the time. They call it identity theft so that you think it is your fault instead of their fault. No one would care about a bank giving a loan to a person that was impersonating them except for the fact that the bank (credit card, mattress store, car dealership, etc) commits fraud and reports to the credit agency that you have defaulted on your loan when you have not. Then the credit reporting agency also commits fraud when they sell this false and damaging information to others. This is the big lie. That "identity theft" should be the problem of the person who was impersonated. Pass laws that heavily fine entities that give false information to credit bureaus and fine credit bureaus who give out false information. "Identity theft" would no longer be something that people would worry about.
- lotsofpulp 6y ago
  I agree that the consequences of identity theft should fall on the financial institutions and credit reporting agencies.
- gruez 6y ago
  >Credit reporting agencies and financial institutions commit fraud all the time. They call it identity theft so that you think it is your fault instead of their fault. No one would care about a bank giving a loan to a person that was impersonating them except for the fact that the bank (credit card, mattress store, car dealership, etc) commits fraud and reports to the credit agency that you have defaulted on your loan when you have not. That's literally what not fraud is. >In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right If some guy walks into a bank and claim they're you and they believe it, the banks aren't gaining anything. If anything, they lost money. Wrongly reporting the default to the CRAs also doesn't benefit them either; it's not like they compensate the banks based on how many default reports they send in. Finally, it's missing the "intentional" part. Lax security practices are negligence at best.
  - bsanr2 6y ago
    >If some guy walks into a bank and claim they're you and they believe it, the banks aren't gaining anything. They would have just sold a loan. >If anything, they lost money. Can't they sell the defaulted loan to collections? >Lax security practices are negligence at best. Systemic, known, and long-standing negligence speaks to intention.

syshum 6y ago

>> And it’s not even just used for credit anymore, renting an apartment now usually requires a credit check. Renting an apartment is credit, I am not sure why you view it has something other than credit? The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments How is that not credit? A better example is employers using it for hiring choices which does happen as well, but using an apartment as an example of bad uses of credit I think it misguided >>. It turns out, the whole idea of a credit score is kind of a lie. Your credit report can be pulled by creditors, and creditors can interpret it in different ways as they see fit. Yes the individual or organization that is loaning you a large amount of money can choose how they use the credit report they obtain for you. Again here I am not sure why this is a revelation or a bad thing. There are also many different and competiting credit scores no person as "a credit score" there are at least 5 if not more credit scores out there and different institutions will use them in different ways. FICO being the most common but not the only >You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report. Yea I believe these institutions should also have to release your personal score with your annual free report, Congress should fix that omission from the law.

gruez 6y ago
>Renting an apartment is credit, I am not sure why you view it has something other than credit? >The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments Not really. In most places you have to pay first and last month's rent, which means you're paying for the service before it's rendered. Therefore they're not extending credit, as you have already paid for the service in advance.
- syshum 6y ago
  Well there are a few problems with this 1. I would like you to define "most places" as for the first 35 years of my life I was a renter and in that time I only ever had to pay "First and last" in one instance. Most of the time it was The first months rent, and security deposit(which was often something small like $100 or $200), no "last months rent" so around here it was not "most places" 2. Even if you use that as a metric that is more like a down payment than a "services paid in advance", unless you are on some kind of month to month with no lease. Every lease I have ever signed shows the TOTAL of all payments which are paid in 12 installments just like a loan, if on month 6th you just move well you still owe the other 6 payments (less any down payment aka last month you prepaid) The owner is absolutely extending you credit for the use of the property, If you sign a lease for an apartment for $1,500 a month for 12 months you are agreeing to pay $18,000 to the owner for the use of the property, you have both agreed to pay that over 12 equal payments, and in your hypothetical the owner has asked for a $3,000 down payment on that loan in exchange the owner adjusted the terms to 10 equal payments

gexla 6y ago

I don't know if this is still the case, but banks at one time would deny you based on poor credit history also. And so, you get to stay in the "unbanked" category which is just another factor which may keep you in poverty. The FinTech industry has since grown to the point that being unbanked doesn't need to be a thing anymore. It's easy to pick up a prepaid debit card which you can receive ACH payments on.