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Yes. There are many complaints about credit scores, often justified, but it’s also true that they remain effective at predicting good behavior in aggregate, and
by TulliusCicero 5y ago
Yes. There are many complaints about credit scores, often justified, but it’s also true that they remain effective at predicting good behavior in aggregate, and also they’re easy to use.
The side arguing that we shouldn’t use credit scores this way usually don’t bother arguing for a viable alternative, because it doesn’t align with their own needs or ideology. They don’t have to worry about people repaying an income sharing agreement or loan, so the fact that not using credit scores makes managing those things harder means nothing to them.
- imachine1980_ 5y agoAre easy for the lender, mean they are good for the society ?
- TulliusCicero 5y agoPotentially, sure. If you can’t measure risk effectively, that means you’ll have to offer everyone the same terms. Since some portion of the population probably ‘deserves’ worse terms, they’ll take out more loans than they otherwise would, using the better terms, which further increases the aggregate risk. So, the equilibrium repayment terms you settle on will probably be worse on average than otherwise. Especially since a lack of credit scores will mean less disincentive to renege on the agreement via non-payment. Honestly, loans seem like the least objectionable use of credit scores to me. Repayment of debt is the main thing they’re built around.