5 ms·

Policy that incentivizes the lower class to be more reckless with their already insurmountable debt levels seems morally dubious. A strange thing to support.

avmich 3y ago
Reckless? While still paying bigger rates than their better credit score peers?
- throwawa14223 3y ago
  Market distortions are not made safe by being smaller than some absolute measure.
svnt 3y ago
I think you misspelled “policy that reduces the debt burden of housing for those who can least afford to subsidize well-off others”?
- geoduck14 3y ago
  >I think you misspelled “policy that reduces the debt burden of housing for those who can least afford to subsidize well-off others”? No. I don't think he did.
cogitoergofutuo 3y ago
How would you help “the lower class” in a way that you don’t find to be morally dubious?
- 2devnull 3y ago
  With respect to housing specifically? I’d be ok with a bunch of different tax policy changes, various policies that encourage housing development, etc... This change in fico value sends a message that will have a very negative impact on those who really need to be encouraged to be better savers, to be more debt averse. If you know many poor people you will understand that they often have pathological issues with their thinking and decisions around debt/credit. Policy that lessens the importance of sound financial decisions will have a negative impact on these groups. They would be much better served by policy reinforcing positive behaviors.
  - cogitoergofutuo 3y ago
    I have lots of poor friends and I have never heard any of them indicate that they’re making their savings decisions based off of the shifting advantages of their FICO scores. I never really quite understood the reasoning that poor people are poor due to a lack of incentives to become not-poor. Being poor isn’t fun, it actually sucks. If poor people are poor because of a pathology as you suggest, what incremental changes to mortgage rates would create an incentive big enough to overcome such an obstacle?
    - 2devnull 3y ago
      I don’t think poverty can be reduced to any one cause. People are poor for a lot of different reasons, often multiple reasons. Some people have problems with financial reasoning, or other psychological money related issues (shopping addiction, gambling, etc). These are groups that do not benefit from mixed messaging about the importance of managing their credit. Credit ratings are a way for lenders to assess risk which allows them to loan out more money, and money to those with fewer assets, than they would be able to lend without the signal credit ratings provide. Diminishing the value of credit ratings is counter to the best interests of the poor and those who see upward mobility as a positive (obviously not everyone!)
      - deleted 3y ago
        [deleted]
  - svnt 3y ago
    This is some 19th century othering. By your definition every group that is subject to different constraints than you has a pathology. People who cannot afford everything they need (even once in a great while, or intermittently) sometimes have to make a choice you don’t: their credit score or keeping their housing, or their credit score or keeping a job, or their credit score or eating. This makes them an increased risk systemically. However representationally they do not have the ability to pull themselves out of poverty because there will be poverty in the system we presently exist in. So if they pull themselves out, someone else slides in, and the systemic risk is the same, and in that context the credit rating is a largely worthless lagging indicator that says “This person at one point in recent history could not afford the commitments they made. We have no idea why, or what those commitment were, or even whether they were the result of financial practices that are now illegal.” What is happening is the world waking up slowly to the idea that a good credit rating is in part a privilege, and not any reflection necessarily of a persons’ ability or willingness to pay for housing.
olliej 3y ago
Ok, in that case why is helping the upper class by giving them reduced fees acceptable? If anything based on your comment you should be in favour of this change as it’s reducing the fee discount received by the upper class, not charging the upper class more than the lower.
- searealist 3y ago
  If everyone in the world had a good credit score, do you think rates would go up, go down, or stay the same for a good credit score?
  - svnt 3y ago
    The data are interesting but I’m not sure they support your point: The average score has risen for the last decade, but the scores also have a fairly strong negative correlation with generation/age. The demographics who will mostly benefit from this are Millennials and Gen Z. https://www.experian.com/blogs/ask-experian/what-is-the-average-credit-score-in-the-u-s/ https://www.experian.com/blogs/ask-experian/what-is-the-aver...
- leereeves 3y ago
  The criteria here is credit score, not income or wealth. There are low income people with good credit scores who are going to be charged more because of this change. If the goal is "reducing the fee discount received by the upper class" it should be targeted more accurately.

avmich 3y ago

Reckless? While still paying bigger rates than their better credit score peers?

throwawa14223 3y ago
Market distortions are not made safe by being smaller than some absolute measure.

svnt 3y ago

I think you misspelled “policy that reduces the debt burden of housing for those who can least afford to subsidize well-off others”?

geoduck14 3y ago
>I think you misspelled “policy that reduces the debt burden of housing for those who can least afford to subsidize well-off others”? No. I don't think he did.

cogitoergofutuo 3y ago

How would you help “the lower class” in a way that you don’t find to be morally dubious?

2devnull 3y ago
With respect to housing specifically? I’d be ok with a bunch of different tax policy changes, various policies that encourage housing development, etc... This change in fico value sends a message that will have a very negative impact on those who really need to be encouraged to be better savers, to be more debt averse. If you know many poor people you will understand that they often have pathological issues with their thinking and decisions around debt/credit. Policy that lessens the importance of sound financial decisions will have a negative impact on these groups. They would be much better served by policy reinforcing positive behaviors.
- cogitoergofutuo 3y ago
  I have lots of poor friends and I have never heard any of them indicate that they’re making their savings decisions based off of the shifting advantages of their FICO scores. I never really quite understood the reasoning that poor people are poor due to a lack of incentives to become not-poor. Being poor isn’t fun, it actually sucks. If poor people are poor because of a pathology as you suggest, what incremental changes to mortgage rates would create an incentive big enough to overcome such an obstacle?
  - 2devnull 3y ago
    I don’t think poverty can be reduced to any one cause. People are poor for a lot of different reasons, often multiple reasons. Some people have problems with financial reasoning, or other psychological money related issues (shopping addiction, gambling, etc). These are groups that do not benefit from mixed messaging about the importance of managing their credit. Credit ratings are a way for lenders to assess risk which allows them to loan out more money, and money to those with fewer assets, than they would be able to lend without the signal credit ratings provide. Diminishing the value of credit ratings is counter to the best interests of the poor and those who see upward mobility as a positive (obviously not everyone!)
    - deleted 3y ago
      [deleted]
- svnt 3y ago
  This is some 19th century othering. By your definition every group that is subject to different constraints than you has a pathology. People who cannot afford everything they need (even once in a great while, or intermittently) sometimes have to make a choice you don’t: their credit score or keeping their housing, or their credit score or keeping a job, or their credit score or eating. This makes them an increased risk systemically. However representationally they do not have the ability to pull themselves out of poverty because there will be poverty in the system we presently exist in. So if they pull themselves out, someone else slides in, and the systemic risk is the same, and in that context the credit rating is a largely worthless lagging indicator that says “This person at one point in recent history could not afford the commitments they made. We have no idea why, or what those commitment were, or even whether they were the result of financial practices that are now illegal.” What is happening is the world waking up slowly to the idea that a good credit rating is in part a privilege, and not any reflection necessarily of a persons’ ability or willingness to pay for housing.

olliej 3y ago

Ok, in that case why is helping the upper class by giving them reduced fees acceptable? If anything based on your comment you should be in favour of this change as it’s reducing the fee discount received by the upper class, not charging the upper class more than the lower.

searealist 3y ago
If everyone in the world had a good credit score, do you think rates would go up, go down, or stay the same for a good credit score?
- svnt 3y ago
  The data are interesting but I’m not sure they support your point: The average score has risen for the last decade, but the scores also have a fairly strong negative correlation with generation/age. The demographics who will mostly benefit from this are Millennials and Gen Z. https://www.experian.com/blogs/ask-experian/what-is-the-average-credit-score-in-the-u-s/ https://www.experian.com/blogs/ask-experian/what-is-the-aver...
leereeves 3y ago
The criteria here is credit score, not income or wealth. There are low income people with good credit scores who are going to be charged more because of this change. If the goal is "reducing the fee discount received by the upper class" it should be targeted more accurately.