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A good middle ground could be to only check what you suggested the bank wants to know: “Has this person defaulted before?” If someone wants to borrow huge sum

by fmbb 3y ago

A good middle ground could be to only check what you suggested the bank wants to know: “Has this person defaulted before?” If someone wants to borrow huge sums from a bank the bank should take the risk and price it appropriately. If someone wants to borrow money to buy a TV the seller should take the risk and price it appropriately. The current solution seems too invasive for what it provides. How is the world better because Schufa knows someone bought a prepaid phone card and can sell that to an online store when you buy a pair of shoes and choose to pay by invoice the next week? Something is in theory cheaper somewhere but where is the proof? The only hard data we have is that Schufa and companies like them are making billions, so there is certainly money to be saved by someone somewhere by scrapping this.

kioleanu 3y ago
Schufa for buying stuff and Schufa for banks are two different branches, meaning that if I buy something with Klarna, they’ll query a Wchufa service for online purchases. A bank credit will query another service from Schufa, which probably tells them what other loans I have and will put a huge dent in the score
burnerthrow008 3y ago
> If someone wants to borrow huge sums from a bank the bank should take the risk and price it appropriately. Yes, but the point is that they can use your credit score to make more fine-grained assessment of risk. Should an auto insurance company offer the same rate to a 97 year old blind driver with a history of accidents as they would to a 30 year old in good health with no tickets? What about the 16 year old who just passed his driving test yesterday? Clearly these three people present vastly different levels of risk to the insurance company and, even though it is certainly possible for the insurance company to do so, it would be stupid to ask them to pay the same rate. The bank is simply doing the same thing: Pricing risk appropriately. The fact that they offer significantly different interest rates to different groups (or decline to offer credit entirely) just shows that these signals are effective at measuring risk. > How is the world better because Schufa knows someone bought a prepaid phone card and can sell that to an online store when you buy a pair of shoes and choose to pay by invoice the next week? Well, the shoe store is extending you credit, so it would seem appropriate for them to want to, as you put it, price the risk appropriately. The fact that you have recently undertaken other credit obligations is suggestive (yes, not conclusive, but still suggestive) that you may be in a precarious place financially and thus statistically more likely not to pay your credit on time.

by fmbb 3y ago

kioleanu 3y ago

Schufa for buying stuff and Schufa for banks are two different branches, meaning that if I buy something with Klarna, they’ll query a Wchufa service for online purchases. A bank credit will query another service from Schufa, which probably tells them what other loans I have and will put a huge dent in the score

burnerthrow008 3y ago

> If someone wants to borrow huge sums from a bank the bank should take the risk and price it appropriately. Yes, but the point is that they can use your credit score to make more fine-grained assessment of risk. Should an auto insurance company offer the same rate to a 97 year old blind driver with a history of accidents as they would to a 30 year old in good health with no tickets? What about the 16 year old who just passed his driving test yesterday? Clearly these three people present vastly different levels of risk to the insurance company and, even though it is certainly possible for the insurance company to do so, it would be stupid to ask them to pay the same rate. The bank is simply doing the same thing: Pricing risk appropriately. The fact that they offer significantly different interest rates to different groups (or decline to offer credit entirely) just shows that these signals are effective at measuring risk. > How is the world better because Schufa knows someone bought a prepaid phone card and can sell that to an online store when you buy a pair of shoes and choose to pay by invoice the next week? Well, the shoe store is extending you credit, so it would seem appropriate for them to want to, as you put it, price the risk appropriately. The fact that you have recently undertaken other credit obligations is suggestive (yes, not conclusive, but still suggestive) that you may be in a precarious place financially and thus statistically more likely not to pay your credit on time.