4 ms·
So your argument is that credit scores do not correlate with risk? How do you think these models get made? Do you understand how trivial it is for an institutio
by searealist 3y ago
So your argument is that credit scores do not correlate with risk? How do you think these models get made? Do you understand how trivial it is for an institution to analyze the past 10 years of loans and see whether the rates they are charging leads to profits or losses.
- toast0 3y agoI think there are many negative factors in credit scores that are predictive, and some that are more iffy. Getting dinged for making late payments or missing payments makes a lot of sense. Getting dinged for not having a car loan or a mortgage is I dunno? Solid loan underwriting also takes into account source of income and some amount of history of income, but it's not part of the credit score at all, which is kind of funny. If your credit limits are out of step with your income, you might get dinged for high balances that you regularly pay off and have capacity to do so, but your limits are just low compared to your income; but you might be getting lots of points for having spare credit, even if it's at a level that would take you a decade to pay back because your income declined and you lenders never found out and didn't reduce your limits. Some lending is done strictly by credit scores, which seems foolish, but usually it's for smaller amounts, so I guess it works out.