22 ms·

I'd love to learn more about this loan system. Do you mind if I ask which country that is?

by bloppe 2y ago

afloatboat 2y ago
I got a loan for a house 2 years ago. The process included showing our 3 last pay slips, the expected cost of the house (new build) and showing the bank how much money we had in our accounts (I loaned at a different bank that gave me better rates). There was a base percentage that lowered based on your level of income and the ratio of own contribution/loaned amount. I live in a Central European country.
- jisnsm 2y ago
  So, credit score with extra steps, and no rewards (lower interests) for people who could prove that they are solvent and responsible with money.
  - LunaSea 2y ago
    Well interest rates are lower in Europe than the US. The other advantage over credit scores is that people willingly give their information out and are able to understand the banks decision.
  - TeMPOraL 2y ago
    > and no rewards (lower interests) for people who could prove that they are solvent and responsible with money. That's really what's driving support for credit scores, isn't it? That they provide some some people the (perception of an) ability to prove their character, their moral superiority, and to feel rewarded for all their hard sacrifices. Similar, I believe, to credit cards and all those rewards and air miles shenanigans - everyone feels they're gonna be winners, so they support a private tax on everyone.
    - llamaimperative 2y ago
      Those seem totally distinct? For example, credit card points are a zero sum game. Credit scores are not. Everyone could be creditworthy, but many are not, and it’s highly beneficial to the entire system to be able to identify which group a person fits into (including for the person who isn’t creditworthy!)
      - TeMPOraL 2y ago
        Maybe? My mind isn't made on credit scores, though I do feel it might be a case similar to insurance - it's not strictly a zero-sum game, but it's also socially harmful to have such a system be 100% efficient. I.e. with insurance, if everyone was correctly pooled into small bucket that near-perfectly reflects their actual risk profile, insurance would stop making sense - those who need it most wouldn't be able to afford it, and those who could afford it need it the least and would be better off putting that money into savings accounts. There's a lot of areas in the economy where increasing efficiency past some point just makes systems inhumane and exacerbates social problems. I feel default risk estimation may just be like that - the more reliable you want your credit score, the more invasive you need to be wrt. what information you collect and how you do it; meanwhile, the system becomes less and less tolerant of mistakes and unfortunate circumstances, while also exerting more control over how people live their lives. Already the US credit score makes people obsessed about credit, and getting credit cards and loans to improve/game their credit scores with their future mortgage in mind. That very much affects people's life choices at scale. I don't think having everyone leading their lives to optimize their credit score is a way to have a healthy society; conversely, maybe letting the lenders eat a little more risk, and the wealthiest (and most responsible with money, and most morally superior) have a little smaller line, actually improves overall well-being.
        llamaimperative 2y ago
        I agree with your concerns but don't feel like we're at that tipping point to be honest, relative to the value of credit being generally easy to get for the legitimately creditworthy. > Already the US credit score makes people obsessed about credit, and getting credit cards and loans to improve/game their credit scores with their future mortgage in mind I've encountered very, very few people doing this to an inappropriate degree (obviously yes you should consistently demonstrate creditworthiness, that's not gaming though). Anecdotally, the people I see doing this are actually seriously not creditworthy. A whole lot of "you bought 3 cars and fucked your score, here's how to dig your way out." But like... the evidence actually shows you can't be trusted with credit! I don't disagree with any of your big picture concerns about the system and the possible edge cases or distortions of priorities. I just haven't seen evidence those are huge problems relative to the value of the system.
  - sumeno 2y ago
    Having bought a house a couple times and having a 800+ credit score each time it doesn't sound like extra steps at all. I also had to provide all that information and more to get a mortgage
- jve 2y ago
  Eastern Europe: I must consent and they do check whether there are any other loans and how good I have paid them. So they do evaluate credit rating at least here.
lentil_soup 2y ago
In Germany you just get a mortgage amount calculated as your yearly income multiplied by some factor (iirc depending on the city) In Spain they look at your last few months of bank movements and calculate how much to loan you (usually something like max a third of your income can go to mortgage payments)
- alphager 2y ago
  We have credit scoring in Germany (with the biggest scoring agency being Schufa).
  - immibis 2y ago
    And it's blatantly illegal under GDPR, but not prosecuted yet. Maybe it won't ever be - corruption runs deep.
- dsnr 2y ago
  In Germany people are asked to provide their Schufa score at their own expense when looking for an apartment to rent.
- speleding 2y ago
  A loan for a house typically isn't really "credit", because the value of the house covers the loan. The small print in your mortgage will say that if you default the bank will get the house. There is some risk to the bank because the house may have declined in value and it may be tricky to sell it when you default. That's why they do a risk assessment, but it can be a lot less invasive than for providing a personal loan for an education.
  - TeMPOraL 2y ago
    > a personal loan for an education Which is another thing we don't do over here in the EU. Perhaps what's left doesn't necessitate a full-blown credit score system?
    - 2y ago
lrem 2y ago
Switzerland - a public service collects a number of Boolean flags in the vein of “has ever refinanced a loan”, serves the raw set to the person or institutions that can request it according to the regulations. Any EU country - regulations tend to be strict and vary from country to country. There is usually a central registry with either history of violated agreements and/or currently active loans. In pre-approval for a loan the borrower typically self-declares their credit capacity and the lender checks the registry for red flags. Before concluding the approval the lender will require supporting documentation (typically salary certificate, bank statement and/or tax returns).
delusional 2y ago
I'm from denmark, and happen to work at one of the larger regional banks here. We similarly don't have "credit scores" in the American sense. We have scores that are calculated internally at our institution, but they're based on whatever we deem to fit our "risk appetite" we do not make use of any external centralized/opaque 3rd party rating agencies. We also have one of the highest household debt rates of any 1st world country, so getting a loan still seems possible. We do have a centralized registry of "bad debtors" and that has a highly negative effect on your ability to get a loan.
Nursie 2y ago
Australia doesn't have credit scores. There are still credit bureaus, and things like defaults, judgements, etc are recorded, and when you apply for credit this is checked. However there are crucial differences to a score system like the UK and (I assume) the US - there is no 'building good credit', you don't get any benefit from having existing credit products and using them well. In fact the opposite - having other forms of credit like a credit card available is seen as a negative when you apply for a mortgage and will impact the amount you can get loaned. They'll literally knock the credit card limit off the top of the mortgage offer.
buildfocus 2y ago
Spain - the bank asks for evidence of income (payslips or tax returns), existing funds (bank/broker statements) and checks outstanding debts (via a public register: https://www.bde.es/wbe/en/para-ciudadano/gestiones/informacion-riesgos-cir/ https://www.bde.es/wbe/en/para-ciudadano/gestiones/informaci...). Risk analysis runs on that data directly. There's no credit history where you need to have ever borrowed money before. Average interest rate on mortgages in Spain with this system appears to be _half_ that of the US, so it seems this isn't so ineffective that premiums have to spike to match. (is that right? https://www.bankrate.com/mortgages/mortgage-rates/ https://www.bankrate.com/mortgages/mortgage-rates/ suggests 6% interest mortgages is a current average in the USA while Spain is below 3% now - personal anecdotes plus gov stats shows 3.25% average on all issued mortgages in 2024: https://ine.es/dyngs/INEbase/en/operacion.htm?c=Estadistica_C&cid=1254736170236&menu=ultiDatos&idp=1254735576757 https://ine.es/dyngs/INEbase/en/operacion.htm?c=Estadistica_...)
- briandear 2y ago
  They are creating a credit score for you. They’re asking for the essentially the same data a credit scoring agency would use. The difference is that they manually underwrite everything. Spain also enforces a much stricter debt to income ratio, which means it’s much harder to get loans for people that already have debt, which means the risk profile is reduced for those that do get approved. Also Spain’s unemployment is among the highest in the EU — and almost three times higher than the U.S., so the central bank’s lower interest rates reflect less of a concern over inflation and more of a concern towards encouraging growth. The low interest rates in Spain aren’t a reflection of reduced risk but of lower central bank rates. You could get 30 year mortgages in the U.S. just a few years ago approaching 2%. Comparing mortgage rates across countries is a pointless endeavor because the macroeconomic circumstances are vastly different. For example, one would think that lower interest rates would result in a increase of housing supply in Spain as investors build more housing because the loans would be cheaper — however that isn’t the case because of the post-tax return on investment (and regulatory risk) for real estate is far worse than an equivalent investment in the United States despite higher lending costs. A €10 million housing project in Spain has a lower ROI than the same project would in North Carolina. Interest rates could be zero in Spain and it wouldn’t change the housing market much because of the myriad of other factors that go into the spreadsheet.

I'd love to learn more about this loan system. Do you mind if I ask which country that is?

by bloppe 2y ago

I'd love to learn more about this loan system. Do you mind if I ask which country that is?

I got a loan for a house 2 years ago. The process included showing our 3 last pay slips, the expected cost of the house (new build) and showing the bank how much money we had in our accounts (I loaned at a different bank that gave me better rates). There was a base percentage that lowered based on your level of income and the ratio of own contribution/loaned amount. I live in a Central European country.

jisnsm 2y ago
So, credit score with extra steps, and no rewards (lower interests) for people who could prove that they are solvent and responsible with money.
- LunaSea 2y ago
  Well interest rates are lower in Europe than the US. The other advantage over credit scores is that people willingly give their information out and are able to understand the banks decision.
- TeMPOraL 2y ago
  > and no rewards (lower interests) for people who could prove that they are solvent and responsible with money. That's really what's driving support for credit scores, isn't it? That they provide some some people the (perception of an) ability to prove their character, their moral superiority, and to feel rewarded for all their hard sacrifices. Similar, I believe, to credit cards and all those rewards and air miles shenanigans - everyone feels they're gonna be winners, so they support a private tax on everyone.
  - llamaimperative 2y ago
    Those seem totally distinct? For example, credit card points are a zero sum game. Credit scores are not. Everyone could be creditworthy, but many are not, and it’s highly beneficial to the entire system to be able to identify which group a person fits into (including for the person who isn’t creditworthy!)
    - TeMPOraL 2y ago
      Maybe? My mind isn't made on credit scores, though I do feel it might be a case similar to insurance - it's not strictly a zero-sum game, but it's also socially harmful to have such a system be 100% efficient. I.e. with insurance, if everyone was correctly pooled into small bucket that near-perfectly reflects their actual risk profile, insurance would stop making sense - those who need it most wouldn't be able to afford it, and those who could afford it need it the least and would be better off putting that money into savings accounts. There's a lot of areas in the economy where increasing efficiency past some point just makes systems inhumane and exacerbates social problems. I feel default risk estimation may just be like that - the more reliable you want your credit score, the more invasive you need to be wrt. what information you collect and how you do it; meanwhile, the system becomes less and less tolerant of mistakes and unfortunate circumstances, while also exerting more control over how people live their lives. Already the US credit score makes people obsessed about credit, and getting credit cards and loans to improve/game their credit scores with their future mortgage in mind. That very much affects people's life choices at scale. I don't think having everyone leading their lives to optimize their credit score is a way to have a healthy society; conversely, maybe letting the lenders eat a little more risk, and the wealthiest (and most responsible with money, and most morally superior) have a little smaller line, actually improves overall well-being.
      - llamaimperative 2y ago
        I agree with your concerns but don't feel like we're at that tipping point to be honest, relative to the value of credit being generally easy to get for the legitimately creditworthy. > Already the US credit score makes people obsessed about credit, and getting credit cards and loans to improve/game their credit scores with their future mortgage in mind I've encountered very, very few people doing this to an inappropriate degree (obviously yes you should consistently demonstrate creditworthiness, that's not gaming though). Anecdotally, the people I see doing this are actually seriously not creditworthy. A whole lot of "you bought 3 cars and fucked your score, here's how to dig your way out." But like... the evidence actually shows you can't be trusted with credit! I don't disagree with any of your big picture concerns about the system and the possible edge cases or distortions of priorities. I just haven't seen evidence those are huge problems relative to the value of the system.
- sumeno 2y ago
  Having bought a house a couple times and having a 800+ credit score each time it doesn't sound like extra steps at all. I also had to provide all that information and more to get a mortgage
jve 2y ago
Eastern Europe: I must consent and they do check whether there are any other loans and how good I have paid them. So they do evaluate credit rating at least here.

lentil_soup 2y ago

In Germany you just get a mortgage amount calculated as your yearly income multiplied by some factor (iirc depending on the city) In Spain they look at your last few months of bank movements and calculate how much to loan you (usually something like max a third of your income can go to mortgage payments)

alphager 2y ago
We have credit scoring in Germany (with the biggest scoring agency being Schufa).
- immibis 2y ago
  And it's blatantly illegal under GDPR, but not prosecuted yet. Maybe it won't ever be - corruption runs deep.
dsnr 2y ago
In Germany people are asked to provide their Schufa score at their own expense when looking for an apartment to rent.
speleding 2y ago
A loan for a house typically isn't really "credit", because the value of the house covers the loan. The small print in your mortgage will say that if you default the bank will get the house. There is some risk to the bank because the house may have declined in value and it may be tricky to sell it when you default. That's why they do a risk assessment, but it can be a lot less invasive than for providing a personal loan for an education.
- TeMPOraL 2y ago
  > a personal loan for an education Which is another thing we don't do over here in the EU. Perhaps what's left doesn't necessitate a full-blown credit score system?
  - 2y ago

lrem 2y ago

Switzerland - a public service collects a number of Boolean flags in the vein of “has ever refinanced a loan”, serves the raw set to the person or institutions that can request it according to the regulations. Any EU country - regulations tend to be strict and vary from country to country. There is usually a central registry with either history of violated agreements and/or currently active loans. In pre-approval for a loan the borrower typically self-declares their credit capacity and the lender checks the registry for red flags. Before concluding the approval the lender will require supporting documentation (typically salary certificate, bank statement and/or tax returns).

delusional 2y ago

I'm from denmark, and happen to work at one of the larger regional banks here. We similarly don't have "credit scores" in the American sense. We have scores that are calculated internally at our institution, but they're based on whatever we deem to fit our "risk appetite" we do not make use of any external centralized/opaque 3rd party rating agencies. We also have one of the highest household debt rates of any 1st world country, so getting a loan still seems possible. We do have a centralized registry of "bad debtors" and that has a highly negative effect on your ability to get a loan.

Nursie 2y ago

Australia doesn't have credit scores. There are still credit bureaus, and things like defaults, judgements, etc are recorded, and when you apply for credit this is checked. However there are crucial differences to a score system like the UK and (I assume) the US - there is no 'building good credit', you don't get any benefit from having existing credit products and using them well. In fact the opposite - having other forms of credit like a credit card available is seen as a negative when you apply for a mortgage and will impact the amount you can get loaned. They'll literally knock the credit card limit off the top of the mortgage offer.

buildfocus 2y ago

Spain - the bank asks for evidence of income (payslips or tax returns), existing funds (bank/broker statements) and checks outstanding debts (via a public register: https://www.bde.es/wbe/en/para-ciudadano/gestiones/informacion-riesgos-cir/ https://www.bde.es/wbe/en/para-ciudadano/gestiones/informaci...). Risk analysis runs on that data directly. There's no credit history where you need to have ever borrowed money before. Average interest rate on mortgages in Spain with this system appears to be _half_ that of the US, so it seems this isn't so ineffective that premiums have to spike to match. (is that right? https://www.bankrate.com/mortgages/mortgage-rates/ https://www.bankrate.com/mortgages/mortgage-rates/ suggests 6% interest mortgages is a current average in the USA while Spain is below 3% now - personal anecdotes plus gov stats shows 3.25% average on all issued mortgages in 2024: https://ine.es/dyngs/INEbase/en/operacion.htm?c=Estadistica_C&cid=1254736170236&menu=ultiDatos&idp=1254735576757 https://ine.es/dyngs/INEbase/en/operacion.htm?c=Estadistica_...)

briandear 2y ago
They are creating a credit score for you. They’re asking for the essentially the same data a credit scoring agency would use. The difference is that they manually underwrite everything. Spain also enforces a much stricter debt to income ratio, which means it’s much harder to get loans for people that already have debt, which means the risk profile is reduced for those that do get approved. Also Spain’s unemployment is among the highest in the EU — and almost three times higher than the U.S., so the central bank’s lower interest rates reflect less of a concern over inflation and more of a concern towards encouraging growth. The low interest rates in Spain aren’t a reflection of reduced risk but of lower central bank rates. You could get 30 year mortgages in the U.S. just a few years ago approaching 2%. Comparing mortgage rates across countries is a pointless endeavor because the macroeconomic circumstances are vastly different. For example, one would think that lower interest rates would result in a increase of housing supply in Spain as investors build more housing because the loans would be cheaper — however that isn’t the case because of the post-tax return on investment (and regulatory risk) for real estate is far worse than an equivalent investment in the United States despite higher lending costs. A €10 million housing project in Spain has a lower ROI than the same project would in North Carolina. Interest rates could be zero in Spain and it wouldn’t change the housing market much because of the myriad of other factors that go into the spreadsheet.