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Credit scores often oversimplify risk, ignore nuanced factors, and can worsen financial struggles for those with low scores by pushing them toward higher costs.
by lodovic 2y ago
Credit scores often oversimplify risk, ignore nuanced factors, and can worsen financial struggles for those with low scores by pushing them toward higher costs. Countries without credit scores don't have higher interest rates or higher rates of defaulting. If we really want to, creditworthiness can be predicted more accurately and fairly with AI models, although that brings another level of bias.
- deleted 2y ago[deleted]
- briandear 2y ago> and can worsen financial struggles for those with low scores by pushing them toward higher costs. Shouldn’t those costs be higher because of the increased risks they represent? If someone has a habit of not paying their debts, why would a lender take on the higher risk without getting paid more? They wouldn’t, so they simply won’t loan the money. However on the other side of this, nobody has to borrow money. If you don’t borrow, credit scores are irrelevant.
- TeMPOraL 2y ago> nobody has to borrow money. If you don’t borrow, credit scores are irrelevant. Except if they want their own place to live. And for the period of about a decade or two, if they want to buy anything over the Internet. For some reason, e-commerce in its early years would only accept credit cards. Took quite a while before debit cards started working for on-line shopping, and by that time, the damage was already done - credit cards got a boost in popularity both in the US and worldwide.
- thunderfork 2y ago[dead]
- tbrownaw 2y ago> creditworthiness can be predicted more accurately and fairly with AI models, although that brings another level of bias I am used to the word "bias" meaning a specific kind of inaccuracy.