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It's interesting seeing the American credit model malfunction so badly so often (massive data leaks, crappy gaming of the system - even today i read on HN not t

• jollyllama 4y ago
  It's not really malfunctioning, in my opinion. It's more or less designed to violate individual privacy and offer as many people access as efficiently as possible. Neither free market absolutism nor exceptionalism are the reason that it's designed this way. At least, not in the way that I think you mean it. Rather, it's because the current economy of the USA is an inflationary credit economy. It's a very un-free market; a great example is education. The government subsidizes loans which drive up the price, and put people in debt so that they are more desperate to take jobs.
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  • lesuorac 4y ago
    I mean, a credit report is only useful if it actually tells me about _your_ credit worthiness. Sure, some Elon Musk guy might have enough credit worthiness to make a $44 billion purchase. But are _you_ Elon Musk or just some guy impersonating Elon Musk? Fraud may not be rampant enough currently but if Experian/etc continue to help fraudsters it will just keep getting worse.
• astura 4y ago
  >even today i read on HN not to pay off your mortgage if you don't have any other loans or it might tank your credit score Only when it drops off your report, which is 10 years after you pay it off. If you were so concerned about having a line of credit on your record then open up a credit card and don't use it, no reason to pay thousands of dollars in interest to avoid an abstract fear of "tanking your credit score." >it really sucks for the average consumer, yet there is no actual change coming I am an average consumer. The credit system is great for me! I'm able to demonstrate my responsibility and as a result I'm able to obtain a large amount of credit products at very low cost as well as pay less for insurance. I guess you can argue that the government should be providing this service rather than private companies or there should be more regulations around security, but the system only "really sucks" for people who take out loans and don't repay them.
  • hedora 4y ago
    Funny story: Rocket mortgage fraudulantly tanked our credit score and refused to fix it. The other bank's underwriting department looked at it, shrugged, and honored the mortgage office's request for an override to give us the best available rate. IMO, Credit ratings are theater.
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    • mrguyorama 4y ago
      I had $60k in the bank and was paying $12k down on a used car that cost $28k and would be worth $30k the second I had the keys (the dealership seemed to low ball it a little, probably because they were a new volvo dealership with one GTI on the lot they had for like a couple months that they needed to get rid of), but no, they still needed to check my credit, which at the time did not exist, and still required me to sign up to $2k interest payments over a 5 year loan that would have been more profitable if I never paid a cent and they could reposes the collateral. I know there are contrived ways I could have killed the value of the vehicle before the loan was done and they couldn't recoup it, but like, come on. My credit report was BLANK. It was never needed in the first place.
  • barbecue_sauce 4y ago
    Why do you consider yourself an average consumer?
    • runarberg 4y ago
      I would love to see some data about this but it wouldn’t surprise me if many USA residents don’t have a credit score at all, or if they do, it is very minimal. Given how many are underbanked, I wouldn’t be surprised if the average credit score is heavily skewed by the people gaming it. Anecdotally, neither me nor my partner have a credit score. I know several people where I’m living that are permanent renters/get owner financed loans, buy used cars with cash (or are simply given old cars, or don’t have a car at all). I did a superficial search and found some census data (https://www.census.gov/data/datasets/time-series/demo/cps/cps-supp_cps-repwgt/cps-banked.html https://www.census.gov/data/datasets/time-series/demo/cps/cp...) but I have no idea how to read it. Edit: Looks like my suspicions have some merit: > 22% of Americans do not have a credit score. Half of this percentage has a stale credit score that makes it impossible to generate a valid FICO score while the other half do not have any credit file with any of the three credit bureaus—Equifax, Experian, and TransUnion. > 18% of Americans have credit scores that fall in the 580-669 range of “fair.” those in the fair range are considered sub-prime and have lower chances of qualifying for a loan or getting better interest rates. https://comparecamp.com/credit-score-statistics/ https://comparecamp.com/credit-score-statistics/
• ndsipa_pomu 4y ago
  There's a bunch of people making money from it and that usually takes precedence over whether it is fit for purpose in other ways.
  • thinkmassive 4y ago
    Yep, think of credit score as a rating of how likely a debtor will be profitable to creditors over the long term.
• randommuser 4y ago
  Does anyone have good resources on what other non us countries do? Asking as an American curious/wanting to learn more.
  • hungryforcodes 4y ago
    Google is your friend...
  • worksonmine 4y ago
    I don't have any resources to share but in my country the bank looks at my income - expenses then checks if I've defaulted on any debts. My limited understanding of the US system is that everyone has (often several) credit cards to build the necessary credit score. Here owning a credit card is for people drowning in debt who struggle to pay bills on time or in rare cases new money flexing their amex black, which is also shunned upon. I've always thought the US system was super weird and backwards forcing debt on people. We don't have credit cards from every big chain and don't get harassed into signing up for cards in the mall, it's just not a thing. We have the same safeguards you have, but we prove it with sensible spending instead of getting debt just to prove that we can pay it in time.
    • Nifty3929 4y ago
      "looks at my income - expenses then checks if I've defaulted on any debts" - This is basically what we do in the US as well. But HOW do they do this in your country? In the US, the loan originators look at year-end tax forms or recent pay stubs to verify income. They look at credit reports from e.g. Experian to verify defaults and other debt information.
      • worksonmine 4y ago
        The paychecks are verified at the bank, probably tax as well. For the debts we have a government authority which is usually the last resort for creditors. This authority also takes care of getting your cash, selling belongings etc to pay off creditors. This is all open data and can be verified with just a phone call to the tax office and debt authority. Some private aggregators exist for convenience but they're regulated in what they're allowed to share and for how long. The private companies are also required to notify me anytime someone checks my score, the government agencies aren't.
• user3939382 4y ago
  > Why? Is it American exceptionalism Because our government is completely corrupt and doesn't represent the interests of the People, at all. It serves and is beholden to large corporate interests, chief among them banks and financial institutions. In a just system that represented our interests Equifax would be forbidden from compiling consumer data after what they did.
  • seniorThrowaway 4y ago
    Exactly, and the best part is it is all out in the open but the majority of people either don't understand or don't care. The corporations openly write legislation via their lobbyists, huge bills that congress themselves don't even fully read let alone write. I've just about given up hope that this will ever change.
    • user3939382 4y ago
      The 2014 Princeton study https://doi.org/10.1017/S1537592714001595 https://doi.org/10.1017/S1537592714001595 highlighted https://i.imgur.com/eH6YcWn.png https://i.imgur.com/eH6YcWn.png what a corrupt sham our "democracy" has become.
• jimbob45 4y ago
  Are you able to offer a better system that is/was working in another developed country?
  • sofixa 4y ago
    I can tell you about the system here in France - when you apply for a loan, the bank asks for some information (your salary, marriage status, kids, etc.) from you to see what you're capable of to spend monthly, and checks with the national bank what loans you have/had, and if you've defaulted on any of them. That's it, they don't need to know more, and the national bank doesn't keep track of everything, only very basic loan information (and of course they have no for profit motive), and nobody outside of a bank where you're applying for a loan uses this information to define your worthiness as a tenant or employee.
    • aantix 4y ago
      But why not? Failure of paying back a loan prior - why would I want them as a tenant? If you had a friend that failed to pay back loans, would you want to make a future loan to them?
      • toomuchtodo 4y ago
        Depends on the terms. People change, situations change. It's a big reason why finance firms in the US are attempting to move away from the three CRAs to cashflow underwriting; it turns out credit scores aren't a great forward looking proxy for repayment ability.
      • nicolas_t 4y ago
        Well, French laws are heavily in favour of tenants so actually contrarily to the OP, it's not that easy to rent an apartment. I'm guessing the OP has a CDI (permanent contract), has a French family name and doesn't look Arab or Black. In those cases, yeah you can get a mortgage relatively easily, you can easily rent too. But, 24.8% of people who are employed have those permanent contract. People who do not have that, have it much tougher. To get back to the example of renting, landlords in France are scared of renting to tenants who don't pay because it's hard to evict tenants, so they often use something called a "Garantie Loyer Impayé" which is an insurance backed by the government that will pay back any unpaid rent to the landlord. But if you don't have a permanent contract, it's hard to qualify for this. When I was searching for an apartment 7 years ago, 80% of apartments rejected me because I was working as a contractor (and what's worse my income was from another country since I was working remotely). They used that insurance and that means that I couldn't qualify. So, yes, if you have a permanent contract in France, things are relatively easy but, even then, I have a friend who is black and worked as an electronic engineer with a permanent contract but still had a hard time securing a mortgage because, for some unknown strange reason, he got rejected a lot more than his white friends. Credit systems with clear rules like the US may be gameable but they have the advantage of actually protecting against racism, of enabling people with non-standard profiles access to credit and of actually being relatively easy to follow.
• tau255 4y ago
  I find it kinda similar to: -USA tax system where Turbofax created a niche for itself and fights hard to keep the system as convoluted as it can be to detriment of everyone -USA healthcare insurance system where insurance companies do the same Seems like best way to profit is to become a parasite that does not fix the problem but just defends the current situation.
• nicolas_t 4y ago
  I disagree with the better ways used elsewhere, as a French citizen who has worked abroad all his life, I can barely get anything. When I came back to France for a year due to my father's health issue, it was difficult getting an apartment because I had proof of income for more than 3 years in France (the current income I was declaring of 150k usd a year working remotely from France didn't count). People in France who have a CDI (permanent contract) can easily get mortgages and everything but entrepreneurs, people on fixed term contracts, etc... have a very hard time getting anything. With a US social security number that I got as a student and good management of my credit card accounts that I kept since, I have a good US credit score and can easily get a mortgage in the US. Of course, it's possible to game it, but you can also get a very decent score by just managing your finances well. So from my perspective, I think the US system works much better. Does it have issues? Yes, there's data leaks, there is some gaming of the system (by the way, paying off the mortgage won't tank the credit score, it'll lower it yes by a few points, but that's mostly inconsequential)
  • mixmastamyk 4y ago
    “Working remotely from” means long term you’ll be paying taxes there. Which should be proof, and if not should be fixed. Having to wait a year or three is probably fine for a mortgage, no?
    • giraffe_lady 4y ago
      French bureaucracy is infamous for a reason and it's not just the state itself. A CDI is a certain type of employment contract, and a CDI is a CDI and everything else isn't, and a CDI is required for almost any significant loan. Workarounds are possible for smaller loans IF you have a personal relationship with the bank officer servicing that area. But if you didn't grow up there, or don't normally bank there, or they're suspicious of your race or tattoos, or were your bully in high school or or or. This sort of thing is more or less exactly what the credit reporting setup was meant to eliminate. It doesn't matter what it "should be" proof of or what a reasonable person could infer from this income or documentation of it. If you don't have a CDI, which even many full-time employed people don't, you're in a hard spot.
• ufmace 4y ago
  We should remember the reason why it was created - to replace decisions for approvals on loans, mortgages, apartment rentals etc being made by low-level individuals for a variety of arbitrary reasons. Many places made such decisions based on personal connections, class, race, and other such things. AFAIK most other places still use such systems. Replacing that with a system where everybody's worthiness and terms for such things is determined algorithmically based on numeric data is a great move towards equality.