6 ms·

I’m surprised that credit scores are even legal, to be honest. I wonder if there’s been any class action lawsuits.

by Tycho 4y ago

sokoloff 4y ago
For me, the pull quote about 40% of the way down the article is key. ("A credit score, at its most basic, is a predictive model of behaviour.") It seems fairly obvious that there's a lot of possible efficiency (read "cheaper and more accessible credit in aggregate" as the consumer benefit) to be had if implemented correctly. Lenders want to lend money to people who will pay it back as agreed. Lenders want to avoid lending money to people who will not (or want to charge an amount sufficient to cover their increased risk and costs). Borrowers want to borrow money at the cheapest possible terms. A system that correctly predicts who is likely to pay back borrowed funds as agreed serves both borrowers and lenders. That means it's unlikely that it should be made outright illegal. Regulations around data quality, challenging suspect data, removing erroneous data, how long correct-but-negative items can stay on the report, etc. are entirely appropriate of course.
- usrn 4y ago
  Racial stereotyping is, in it's most basic form, a predictive model of behavior. It's also illegal in nearly any financially meaningful situation.
- deleted 4y ago
  [deleted]
- p49k 4y ago
  > A system that correctly predicts who is likely to pay back borrowed funds as agreed serves both borrowers and lenders. Such a system can't be built without being unfairly biased against some people who don't fit a certain mold, and thus it should be illegal. Most of Europe has a much simpler system: Your ability to obtain credit is based on the past several years of income, with a penalty for instances over the past ~7 years in which you didn't pay back debts. That's it; no predictive modeling or scoring or other nonsense; everyone has an even chance at credit.
  - sokoloff 4y ago
    “Instances over the past ~7 years in which you didn’t pay back debts” is used precisely because of its value in predictive modeling your likelihood to pay back prospective new debt.
  - MadeThisToReply 4y ago
    > Your ability to obtain credit is based on the past several years of income, with a penalty for instances over the past ~7 years in which you didn't pay back debts. Okay, and using these inputs, what function is applied to determine whether or not to grant the loan? How does that system differ from a "credit scoring" system, apart from that your perceived ability to repay isn't explicitly mapped to a single variable?
  - zo1 4y ago
    Maybe I'm missing something, but you just described a credit score system.
    - bombcar 4y ago
      I suppose the difference is that the bank has to refuse you in the EU system, instead of pawning the refusal off to a third party that does the calculation.
      - sokoloff 4y ago
        In the US, the refusal is still from the lender, based on information from zero or more credit reporting agencies.
        bombcar 4y ago
        Yeah, but they always word it as blaming the agency.
        sokoloff 4y ago
        That is likely a consequence of a requirement of the Fair Credit Reporting Act under which you must be told when information in your credit file is used against you to deny your application for credit, employment or insurance. I haven’t been denied in a long time, but my recollection was the refusal was from the lender and included “we may have used information from <reporting agencies>; here’s how you can get a free copy of the information in your file…”
- galoisscobi 4y ago
  This is a really good explanation as to why my credit score dropped by ~30 points each time I finished paying off a student loan early.
  - xeromal 4y ago
    The drop is usually temporary anyways. Credit scores are best seen as an average similar to looking at your weight. If you weigh yourself every day, you're going to get a different weight every day. Same with a credit score. Best to look at the change over time.
kkfx 4y ago
Neoliberals want a society of Ford-model obedient workers-subject-citizens to master them as a shepherd keeps his flock, since most humans actually obey but only "a certain bit" they invent ways to judge humans like a farmer who price his livestock as a way to reach such obedient flock they dream. The "class action" should be a public imposition against such scoring simply saying in Democracy People rules, we rule that no such things is allowed, you are a minority who can obey or being crushed. But since we are not in Democracies, they are just corporato-dictatorships dressed as formal, not substantial, democracies and most are not Citizens but just subjects...
javagram 4y ago
It’s regulated and allowed by law. https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp https://www.investopedia.com/terms/f/fair-credit-reporting-a...
legalcorrection 4y ago
Credit scores from the major credit bureaus are such a big deal because handing out credit on an ad hoc basis is de facto illegal. You will be sued and accused of discriminating against black people. You will probably lose, or spend enough money on legal fees to have lost anyway. To defend against that, you have to make the process as rigid and impersonal as possible. The best approach is to use the government-blessed credit bureaus.
- solarkraft 4y ago
  The joke behind that is that there's just as much discrimination, just hidden behind some intransparent algorithms.
  - legalcorrection 4y ago
    Making the process rigid and algorithmic helps make sure that you aren't using race itself as a variable in your analysis, but it doesn't change facts about the world. Black people have lower credit scores because as a group, they are less likely to pay their bills on time or at all. But because race isn't considered as a factor, a black person who is financially responsible is not dinged just because other black people aren't.
maxerickson 4y ago
The US has extremely weak privacy rights.
- tediousdemise 4y ago
  As intended. There is no better way to influence someone's behavior than when they have the feeling of constantly being watched. It's about control.
  - maxerickson 4y ago
    Intended by who or what? Like if there is some entity that just gets what they want it doesn't really matter that you feel controlled, because you are.
    - tediousdemise 4y ago
      Intended by the US government. https://en.wikipedia.org/wiki/XKeyscore https://en.wikipedia.org/wiki/XKeyscore
- kube-system 4y ago
  Credit reporting exists nearly everywhere. Regulations vary by region, but the general collecting and reporting of credit information is legal most places. Many of the places where people think they don't have a "credit score" are just places where credit worthiness is quantified differently, or local regulations don't have the same transparency requirements that exist in the US.
kube-system 4y ago
Credit scores are just math, applied to your credit history. What about that is surprisingly legal?
- Tycho 4y ago
  If I wanted to start a business that would involve collating the private financial transactions/history of individuals and then sharing it (via a summary statistic) with clients in a context where there might be adverse consequences for the individual, without them granting permission, I would expect to get laughed out of the licensing office.
  - kube-system 4y ago
    Maybe you'd be surprised then. There are many consumer credit operations in the EU, operating under GDPR.
pessimizer 4y ago
And we play superior to China and their "social credit" although the US/UK/Canada/Germany are the only places that allow something similar.
- kube-system 4y ago
  Not true. The big "US" credit bureaus have operations all around the globe, and there are many regional players in this market too. https://en.wikipedia.org/wiki/Credit_bureau#List_of_credit_reporting_agencies https://en.wikipedia.org/wiki/Credit_bureau#List_of_credit_r... "Social credit" is an entirely different thing.
whywhywhywhy 4y ago
Can't believe it's legal or that people happily participate in this complete scam. If I never borrow money and survive on my own terms my score should be perfect. Instead I'm marked down for never risking getting in to debt.
- kube-system 4y ago
  That's simply not logical. The absence of responsibility is not a demonstration of responsibility.
- seattle_spring 4y ago
  "If I've never taken a math test, then it should be assumed that I'm great at math because I've never failed a math test."
jimmaswell 4y ago
What do you propose? Everyone gets a loan, no questions asked, no consequences for anything?
- Tycho 4y ago
  I wasn’t proposing anything, just expressing surprise that corporations are able to conspire against members of the public in this manner. That someone can just go and find out your personal history and sell it to parties you’re trying to transact with.

I’m surprised that credit scores are even legal, to be honest. I wonder if there’s been any class action lawsuits.

by Tycho 4y ago

I’m surprised that credit scores are even legal, to be honest. I wonder if there’s been any class action lawsuits.

For me, the pull quote about 40% of the way down the article is key. ("A credit score, at its most basic, is a predictive model of behaviour.") It seems fairly obvious that there's a lot of possible efficiency (read "cheaper and more accessible credit in aggregate" as the consumer benefit) to be had if implemented correctly. Lenders want to lend money to people who will pay it back as agreed. Lenders want to avoid lending money to people who will not (or want to charge an amount sufficient to cover their increased risk and costs). Borrowers want to borrow money at the cheapest possible terms. A system that correctly predicts who is likely to pay back borrowed funds as agreed serves both borrowers and lenders. That means it's unlikely that it should be made outright illegal. Regulations around data quality, challenging suspect data, removing erroneous data, how long correct-but-negative items can stay on the report, etc. are entirely appropriate of course.

usrn 4y ago
Racial stereotyping is, in it's most basic form, a predictive model of behavior. It's also illegal in nearly any financially meaningful situation.
deleted 4y ago
[deleted]
p49k 4y ago
> A system that correctly predicts who is likely to pay back borrowed funds as agreed serves both borrowers and lenders. Such a system can't be built without being unfairly biased against some people who don't fit a certain mold, and thus it should be illegal. Most of Europe has a much simpler system: Your ability to obtain credit is based on the past several years of income, with a penalty for instances over the past ~7 years in which you didn't pay back debts. That's it; no predictive modeling or scoring or other nonsense; everyone has an even chance at credit.
- sokoloff 4y ago
  “Instances over the past ~7 years in which you didn’t pay back debts” is used precisely because of its value in predictive modeling your likelihood to pay back prospective new debt.
- MadeThisToReply 4y ago
  > Your ability to obtain credit is based on the past several years of income, with a penalty for instances over the past ~7 years in which you didn't pay back debts. Okay, and using these inputs, what function is applied to determine whether or not to grant the loan? How does that system differ from a "credit scoring" system, apart from that your perceived ability to repay isn't explicitly mapped to a single variable?
- zo1 4y ago
  Maybe I'm missing something, but you just described a credit score system.
  - bombcar 4y ago
    I suppose the difference is that the bank has to refuse you in the EU system, instead of pawning the refusal off to a third party that does the calculation.
    - sokoloff 4y ago
      In the US, the refusal is still from the lender, based on information from zero or more credit reporting agencies.
      - bombcar 4y ago
        Yeah, but they always word it as blaming the agency.
        sokoloff 4y ago
        That is likely a consequence of a requirement of the Fair Credit Reporting Act under which you must be told when information in your credit file is used against you to deny your application for credit, employment or insurance. I haven’t been denied in a long time, but my recollection was the refusal was from the lender and included “we may have used information from <reporting agencies>; here’s how you can get a free copy of the information in your file…”
galoisscobi 4y ago
This is a really good explanation as to why my credit score dropped by ~30 points each time I finished paying off a student loan early.
- xeromal 4y ago
  The drop is usually temporary anyways. Credit scores are best seen as an average similar to looking at your weight. If you weigh yourself every day, you're going to get a different weight every day. Same with a credit score. Best to look at the change over time.

kkfx 4y ago

Neoliberals want a society of Ford-model obedient workers-subject-citizens to master them as a shepherd keeps his flock, since most humans actually obey but only "a certain bit" they invent ways to judge humans like a farmer who price his livestock as a way to reach such obedient flock they dream. The "class action" should be a public imposition against such scoring simply saying in Democracy People rules, we rule that no such things is allowed, you are a minority who can obey or being crushed. But since we are not in Democracies, they are just corporato-dictatorships dressed as formal, not substantial, democracies and most are not Citizens but just subjects...

javagram 4y ago

It’s regulated and allowed by law. https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp https://www.investopedia.com/terms/f/fair-credit-reporting-a...

legalcorrection 4y ago

Credit scores from the major credit bureaus are such a big deal because handing out credit on an ad hoc basis is de facto illegal. You will be sued and accused of discriminating against black people. You will probably lose, or spend enough money on legal fees to have lost anyway. To defend against that, you have to make the process as rigid and impersonal as possible. The best approach is to use the government-blessed credit bureaus.

solarkraft 4y ago
The joke behind that is that there's just as much discrimination, just hidden behind some intransparent algorithms.
- legalcorrection 4y ago
  Making the process rigid and algorithmic helps make sure that you aren't using race itself as a variable in your analysis, but it doesn't change facts about the world. Black people have lower credit scores because as a group, they are less likely to pay their bills on time or at all. But because race isn't considered as a factor, a black person who is financially responsible is not dinged just because other black people aren't.

maxerickson 4y ago

The US has extremely weak privacy rights.

tediousdemise 4y ago
As intended. There is no better way to influence someone's behavior than when they have the feeling of constantly being watched. It's about control.
- maxerickson 4y ago
  Intended by who or what? Like if there is some entity that just gets what they want it doesn't really matter that you feel controlled, because you are.
  - tediousdemise 4y ago
    Intended by the US government. https://en.wikipedia.org/wiki/XKeyscore https://en.wikipedia.org/wiki/XKeyscore
kube-system 4y ago
Credit reporting exists nearly everywhere. Regulations vary by region, but the general collecting and reporting of credit information is legal most places. Many of the places where people think they don't have a "credit score" are just places where credit worthiness is quantified differently, or local regulations don't have the same transparency requirements that exist in the US.

kube-system 4y ago

Credit scores are just math, applied to your credit history. What about that is surprisingly legal?

Tycho 4y ago
If I wanted to start a business that would involve collating the private financial transactions/history of individuals and then sharing it (via a summary statistic) with clients in a context where there might be adverse consequences for the individual, without them granting permission, I would expect to get laughed out of the licensing office.
- kube-system 4y ago
  Maybe you'd be surprised then. There are many consumer credit operations in the EU, operating under GDPR.

pessimizer 4y ago

And we play superior to China and their "social credit" although the US/UK/Canada/Germany are the only places that allow something similar.

kube-system 4y ago
Not true. The big "US" credit bureaus have operations all around the globe, and there are many regional players in this market too. https://en.wikipedia.org/wiki/Credit_bureau#List_of_credit_reporting_agencies https://en.wikipedia.org/wiki/Credit_bureau#List_of_credit_r... "Social credit" is an entirely different thing.

whywhywhywhy 4y ago

Can't believe it's legal or that people happily participate in this complete scam. If I never borrow money and survive on my own terms my score should be perfect. Instead I'm marked down for never risking getting in to debt.

kube-system 4y ago
That's simply not logical. The absence of responsibility is not a demonstration of responsibility.
seattle_spring 4y ago
"If I've never taken a math test, then it should be assumed that I'm great at math because I've never failed a math test."

jimmaswell 4y ago

What do you propose? Everyone gets a loan, no questions asked, no consequences for anything?

Tycho 4y ago
I wasn’t proposing anything, just expressing surprise that corporations are able to conspire against members of the public in this manner. That someone can just go and find out your personal history and sell it to parties you’re trying to transact with.