I always assumed credit scores were an integral and historic part of the American financial system.
They were not, they are very recent，most of your parents didn’t have credit scores growing up, and as you can probably tell or at least intuit, it’s mostly just a b******* scheme for those with capital to accrue more capital by invading your privacy.
It sucks but things were worse before, especially if you were black.
Or an immigrant. Or a woman (especially if you’re pregnant). Or if you lived near black people or immigrants. Or if you had long hair. Or maybe the local bank manager just didn’t like you. These were all acceptable reasons to deny your loan application prior to credit scores.
They literally made decisions based on things you can’t control. Banks are now legally prohibited from even asking these things. If you notice, people working at a bank will never ask “where are you from?”
Fuck I sound like a bootlicker but the net result was that it took away some control of the rich to influence social mobility.
But rich people are living organisms and their think tanks are the smartest. They’ve already found ways around it.
As time moves on, a lot of things containing racial bias have gotten more abstract. For example, we don’t segregate schools by law anymore, but African-Americans do tend to live in neighborhoods together, those neighborhoods tend to have lower property values, and schools are funded by the taxes on property values. Segregation is still there, but you have to go a few layers deep to find it.
However, as its been forced to get more abstract, it’s also become less effective. Without absolute prohibitions against African-Americans attending the same schools as white people, there has been more upwards mobility of African-Americans to live in better neighborhoods with better schools and end cycles of poverty. Still, it would be better if we got rid of this dumb property tax system for schools altogether.
Credit scores are the same. It abstracted away the racism. It’s still there, causing unnecessary hardship, but not to the degree previous systems did. There is more room for upwards mobility, but that doesn’t mean we should leave it as it is.
However, as its been forced to get more abstract, it’s also become less effective. Without absolute prohibitions against African-Americans attending the same schools as white people, there has been more upwards mobility of African-Americans to live in better neighborhoods with better schools and end cycles of poverty.
That’s highly debatable. There are definitely some groups of African Americans who have cracked the glass ceiling. But on average, black household wealth has significantly lagged white wealth accumulation year-over-year. Case in point, the '08 crash decimated black households to the tune of 40% of their total accumulated savings. The COVID crisis saw higher rates of mortality in black communities, as well as higher rates of unemployment, of declines in school completion rates (from high school up through graduate programs), and of divorce. All negatively correlated with wealth accumulation.
Maybe since '89 things have improved. But the last two decades have sucked and African Americans have eaten disproportionate amounts of shit during it.
Came here to say this. Credit scores are meant to remove some of the racial and social bias from the decision making. That was the idea anyway.
Doesn’t mean this is how it has to be. It can be improved further.
While true, don’t let perfect be the enemy of the good.
Yes, and I’m only making the opposite counter-point: Don’t stop doing a good thing, like fixing broken systems.
I love it how everyone enjoys pointing out the negative interpretation when it’s in response to something that makes it utterly clear I mean the positive interpretation.
You may as well be saying, “if it ain’t broke, don’t fix it”, which I’m sure is not what you mean, but that’s exactly what responding with a counter-view implies at this point.
How can it be improved further. If you’re going to say stuff, give us a “such as,” otherwise it comes off as a negative, it’s not good enough. Gotta be constructive with the criticism. I’m reading a lot of negative reactions and I want some actual rationale for it, because I guess I’m uneducated on the topic and I fail to see what the issue is. Credit is people giving you money. There’s a system that keeps track of your credit history. Don’t want it? Don’t get credit, that’s it. Have 0 credit and then reap the rewards of that if you want.
Such as if you’ve been paying rent for years you should be allowed to pay an equal amount for a home you may actually own one day. That’s my main one.
I don’t understand what you mean or how that relates at all. And I’m not trying to be obtuse, I just don’t see a rational nexus between what you’re paying in rent now versus what you may pay as a mortgage on some completely different piece of property. Owning a piece of property and renting one are two different things.
Now, should paying rent be reflected on your credit score? I believe so, for better and for worse. If you are a good tenant, always pay rent on time, to me that reflects well on your fiscal health. I think the only reason it’s not is because who is there to report it? Only way it would be is if you could put it on your credit card, and I’m not sure any landlords take credit cards.
Credit scores are meant to
removeobfuscate some of the racial and social bias
Mass incarceration in the modern era makes that a hard comparison to square up.
Are you better off today as a middle class black suburbanite throwing a third of your paycheck at a subprime loan for a house you couldn’t even legally own 40 years ago? Yeah, sure, I guess.
Are you better off today as a teenager in a Texas supermax prison without working A/C, working 12 hour shifts for less than a dollar an hour, while the state government frets that there aren’t enough people like you to meet some arbitrary imprisonment quota? Doubtful.
Post-Reagan, society has been a decided mixed black for African Americans.
It’s not like they didn’t look through your financial history before then - they just didn’t have to show their working publicly, which meant you could ne discriminated against for any number of things
So the same now, except now all personal data is located in one place according to the rules they set, from which they can sell your data and preemptively block you or refuse to meet you to discuss your practical repayment capability.
All of those could be and were done before, only it wasn’t public so you had no way to also know your score.
Your hypothesis is that before computers and data centers were used in business to cross-reference, centralize, analyze and store private and public data, and before a personal credit rating system was implemented, businesses were using cross referenced, centralized, analyzed mountains of paper files on all potential consumers nationwide, directly related to their business or not, to calculate 300+ million personal credit scores that didn’t exist yet?
You’re taking more than a leap, you’re jumping right off the cliff.
Uh, okay then. Damn I’m old. Apparently. 🧐 Funny though that the younger generation cannot imagine how life worked pre-personal-computers (or even before computers entirely).
It’s the same with each generation. You probably didn’t have to take academic tests on how many bushels of carrots you could bring to market a week because you weren’t educated as a yeoman, as previous generations to you were, when that data was more relevant.
I think the younger generation understands how things worked before computers became widespread, but it isn’t relevant to there life or much of the current global order, so it isn’t at the forefront of their mind.
No, you’re just taking a binary view of history.
- before there was any transparency, decisions were made based on your credit score and report, but it was tough to argue when they didn’t have to tell you why
- before there were standard scores and reports, there were still computers and networks. Each bank did similar by themselves
- before there was centralized banking records per corporation, they had to collect similar data about you and each bank had policies for a banker to decide
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Yes, before you had a predetermined credit score, your credit score was assessed on a case-by-case basis. I don’t know why you think things are transparent now.
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Computers are not as old as you think they are.
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Yes, before you had a predetermined credit score, your credit score was assessed on a case-by-case basis.
There is transparency to the extent that the decision is based almost entirely on your credit score and credit record. You can see a copy of your credit record any time, which is a fairly new thing. You can see similar credit scores and if they turn you down for anything they are required to tell you what it was. While you may not know the calculation, you know what goes into it at least well enough. Most importantly the decision is mostly objective and consistent, by computer, driven by this data. It’s not entirely transparent but more so than at any time in history
The decision should be based entirely on your credit score on record, which is determined by factors out of one’s control.
You can assume what goes into your credit score, but the more important point is that you don’t and that is proprietary information owned by a very small amount of companies that profit from your information.
Given the above, I can’t come to the conclusion that determining your individual value based on circumstances out of your control is objective.
As for consistency, if you get sick and accrue hospital bills you can’t immediately pay, your credit rating plummets. That doesn’t sound very consistent, relevant, or objective.
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uh… that’s exactly how it worked. The Wikipedia page you linked mentions credit bureaus. If you go to that page you can see they were established in the USA by the mid 1800s. Yes, it was all done on paper. That’s how the world used to work.
No, that is not how it was done. Before, The time was put in to assess the relevant data your creditworthiness.
Today if you break a leg and have a hospital bill, your chances of receiving credit are automatically lowered.
There’s a huge difference between being investigated for credit worthiness and automatically being assigned a score filled with arbitrary private data irrelevant to debt or credit.
Are you a racial minority? Your credit score probably isn’t as good as a white guy’s credit score.
https://www.federalreserve.gov/econres/feds/files/2022067pap.pdf
Assessing relevant data on an individual’s debt risk makes sense.
Collecting everybody’s private information so that three companies can determine, without ever meeting you or knowing anything about you, teally, the amount you are allowed to succeed or take advantage opportunities is b*******.
The 19th century credit bureaus and today’s credit ratings are completely different.
You’re not wrong - I was just pointing out it’s always been that way. The rich never played fair, they played to win.
Do they show their work now, or just a score based on a bunch of non-public calculations?
They don’t provide the exact formula, but they will provide what influences the score and their record of those factors.
That isn’t public.
It requires trust to believe that they are telling the truth about what impacts the score in a positive or negative way.
Plus they say it in the most vague way so people can’t ‘game the system’ which is not an issue if the system is fair because ‘gaming the system’ is doing the thing they want you to do. Sometimes it looks like the things they say are accurate, but other times they appear to have the opposite effect because of some interaction they aren’t telling us. Like the fact that paying off a loan too early reduces your credit score even though having fewer debts is supposed to increase it.
They are pretty precise on what to do in order to game the system.
Get credit cards that you pay off every month. Keep your first free credit cards as long as possible to boost your account age. Keep you credit card account balance as low as possible. Take out as many 0% interest loans as you can.
Total debt has never been a function of the score.
The calculation is opaque to both you and the banker but it is calculated the same way by the agency that does it.
If your credit application is rejected, they are required to show you the score and you’re entitled to free copies of your credit report data (historically you couldn’t see your data or had to pay for it). The banker can give generic advice on improving your score and point out things in your credit report them at look bad and suggest ways to finesse them, but the calculation and decision are mostly out of his hands. He doesn’t really know
Plus before it was down to an individual, each of which had their own biased. While credit scores are all kinds of wrong, it does take the decision out of the hands of insividuals and makes it an objective, data driven decision
It’s our version of China’s social credit score.
There’s no such thing as “China’s social credit score”. All of thar came from small local projects and miss translating articles.
Edit: https://youtu.be/Kqov6F00KMc for the 10000 people whose just today are learning about it.
Your social score has increased to: 🌟🌟🌟🌟
Thank you for your continued support in defense of this system. Your alliegance has been noted.
But what does Mr. Translating have to say about the situation?
He can’t be arsed to care at all, frankly.
That is not true. I have had Chinese friends tell me that for example you cannot fly on a plane if your social score is too low.
He gave you any proof, or just told you? Care to share it?
If any other random person wrote an article, would you believe them more?
The guy that have been doing videos on geopolitics and China for years or the friend of the guy on lemmy?
Also: https://merics.org/en/comment/chinas-social-credit-score-untangling-myth-reality
Are you sure it’s 10,000? That sounds like a lot.
The 10,000 part is a reference to this XKCD comic
Except we don’t get the free housing and tuition, the cheap and efficient mass transit, or the retirement at age 55.
I tried to open a bank account at a credit union while homeless. Had $42k on my direct express card, finally on SSI, lump sum was for the previous year while unable to work.
No debts, never used a credit card. Couldn’t open a bank account. Had to go thru a program that assigned me a fake credit card debt that I had to pay off for 6 months to get my credit score high enough.
Credit scores are a scam.
Sorry but that credit union sucks and you needed to move on. Credit unions should never deny someone an checking or savings account if they do not have a history of abuse.
This is my point, thank you for sharing your story.
If you are injured, not lucky or born into less fortunate circumstances, this credit system will stop you from taking control of your life.
Indeed. As evidenced by the fact that doing things that are money-smart (in general, stuff that amounts to avoiding debt) is actually harmful to a credit score. The powers that be want you to consume on borrowed funds.
It’s depressing what happens when we give corporations the leeway to do whatever they want, isn’t it?
To be fair I wouldn’t loan money to a homeless person either.
He wasn’t getting a loan
What they’re describing is a pretty common financial product. They process a small unsecured loan which is placed straight into a escrow account with autopay so as far as the credit calculation goes they have a loan for which they are making consistent payments on until it’s paid off. It’s basically a hack to get some positive line items on the credit report to to try drag the score up a little
Credit scores didn’t exist but credit bureaus date back to the mid 1800s in the USA. Also, as others have mentioned creditors would do their due diligence and try to assert that you would be able to pay back your loans by doing many of the same things they do now.
This really isn’t some new, crazy concept like you’re making it out to be. The score has only simplified the process.
The score simplified the process for creditors of pre-assessing your risk as a debtor so that they don’t have to put in the work to actually assess your rush a debtor, leading to an irresponsible and imbalanced credit system that you can’t benefit from unless you are born on the right side of the tracks.
I didn’t say the concept was new or crazy.
This is a way for operators of capital to accrue more capital and more easily distance themselves from everybody else, whose information they profit from, rather than creating opportunities.
I am not on our mortgage on the house that I own with my husband. I am employed, full time. At the time I had no debt, and the car loan was in my husband’s name.
They told me I couldn’t be on the mortgage because I had no credit score.
that’s how it works. you have no credit history you can’t be trusted wiht a major loan like a mortgage.
you need credit history.
My response was to someone who claimed that the system has not fundamentally changed due to credit scores being introduced.
Yes, it is true this is how it works now, it is not how it used to work.
creditors would do their due diligence and try to assert that you would be able to pay back your loans by doing many of the same things they do now.
In the Netherlands this would boil down to:
- proof of employment (pay check and statement from your boss)
- summary of outstanding debts
That’s it. The BKR system only tells you any outstanding debts (such as a car or phone to pay off) or if you stil owe significant money to debtors. It doesn’t tell you how long you’ve been a good citizen.
Bank-internal credit scores existed since 1965 at Citibank… Then some Citibank employees formed their own company, FICO, to sell scores to banks without data or computing power to do so
Back in the seventies/early eighties, I remember my grandmother getting financial privilege by showing the check numbers in her checkbook, which were in the high thousands.
If you ran around bouncing checks, you would get cut off long before that and have to start over at the dreaded check number 101.
Such simpler times.
ahhhh so thats why in the late 80s you could start your checks at 1000+
Imagine someone handed you check #001 for $1000…would you really trust it?
Knowing that you can order checks with any number you want printed in them. I would trust it as much as i would trust a check with any other number. Maybe actually a little more than check #69420 or #58008.
Remember when there wasn’t a proprietary algortithm giving everyone a social credit score and instead you had to get a letter from an existing member to signify your trustworthiness?
I dont like the proprietary nature of credit algos, but I’m not a fan of the letter system either
I prefer the occasional letter to the constant, invasive proprietary algorithm.
Problem is when you move to a new country and can’t open a bank account because you dont know anybody
Tbf personal credit cards have only been around since a couple decades before that.
But they primarily use credit scores to deny mortgages to people. Getting a CC with a bad credit score is very easy. The rates will just suck. And we’ve had mortgages, car loans and business loans a lot longer.
Just wait till you learn what they used to deny people mortgages before the invention of credit scores.
I mean, they still use racism to do that. Now they also have credit scores to do so for poor people.
It was their eyeballs and racism!
Can you expand on the eyeballs part? I swear I remember something about that which I can’t remember and I’m getting nothing of use on Google
You used to go to the bank and they could see the color of your skin with their eyeballs.
Hmm I feel like I remember something about eye shape that was used for discrimination, probably related to frenology
Credit cards, but not credit. Home, auto, business, and other loans have existed long before that.
And those loans were far more restrictive than modern day and usually more references and cosigners.
In Norway having loads of credit cards is negative for getting a house loan as it is potential debt that goes against your payment ability for the house loan.
Meaning we do have a credit score system for getting loans and more stuff on various credit solutions, but credit cards works against larger loans.
Which can be a pain in the ass when you want to buy a house/apartment and have credit cards that might deny you the last bit of money to win the bidding war…
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Not sure if you misunderstood the post. What they write is how it works in Norway. If you have two credit cards with 50k credit limit each, then that count as 100k debt when the bank calculates your ability to pay off a loan, it doesnt matter if you haven’t used them.
Exactly. It is potential debt and it goes against getting new loan/debt from banks. No matter if you have used the credit card or not. The banks look at the available limit on an your credit cards or available credit and view that as debt when they calculate how much they can loan you.
I have to imagine credit ratings are fairly ubiquitous, since banking is international, and who’s giving the money out? Would make no sense to penalize someone for having a lot of available credit. Maybe if you have 10 cards with low available credit, and they’re all maxed out and you’re just paying minimums, that’s bad. That’s bad in America too. Amount of available credit less amount of credit used seems to be a big factor.
Maybe this explains further https://lemmy.world/comment/7822919
That seems like a reasonable approach though, unless I’m missing something. If you need “loads of credit cards” then you’re already but living within your means.
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What’s the point of that?
Store offers 0% on items you need, appliances, bedroom furniture. You’re going to spend thousands and they let you pay that shit over the course of 12 or 24 months. To me it’s a no-brainer. Only downside is I can’t use my Raynour & Flannigan card at Best Buy or Home Depot, so I need their cards too.
I hope this is satire… because that’s not how you are supposed to use credit cards if you want to have a good credit score.
It was a response to someone asking why one would accumulate multiple cards. It’s a reason. I’ve done it. I have 800+ credit score. Guess it worked out. I think the most important factors are paying your shit down fast and maintaining a good ratio of high available credit with low usage. At this point I’m at three or four cards and one or two other lines of credit. In the past, it’s been more of each.
Basically, you don’t get a good score by not using credit.
Nothing wrong with having 3 cards, in fact that seems to be the sweet spot. Closing cards is never good so you don’t want to just go around willy nilly opening up cards.
You are absolutely right in that you have to use it to have a good score, but you have to use it wisely. Maintain a low balance, don’t allow cards to go dormant, keep requesting increases to available credit every 6 months so that your utilization will be minimized, and diversify your portfolio with three cards, and at least one line of credit that you never use, and a revolving account like a car or home once you are ready. Sounds like you figured out their formula, congrats on the 800+.
I was 812 until I bought a house, and that knocked me down to 760. Everything I read indicates that It will take at least 5 years of making extra payments on my house for me to get back to 800+, not that it really matters because the only reason I needed a high score in the first place was to get the house.
Lol why not? I did the same thing when I bought a washer and dryer and my score is over 750. I had the cash to pay it outright but why spend it when Home Depot will finance it for free?
If your total utilization is greater than 10%, or if you have a high balance carried over multiple months, your score will decrease. It will be a few months after the balance is paid in full and you utilization is reduced to below 10% that your score will recover. Then you are stuck with that card because if you ever close it, you will take another hit.
Opening a credit account is a commitment and shouldn’t be done just to get an interest free period on an appliance. You will be hit with a hard inquiry when you open the card, and will be hit if you ever close the card. An interest free period is not really a great sign-on bonus anyway because if you take them up on that, you will see a temporary hit to your score.
If you spend thousands a year at Home Depot (like a contractor or handyman) then a Home Depot card makes sense. I spend a lot at Costco so the Costco card makes sense, also the Amazon prime card makes sense for me because I shop at Whole Foods a lot.
A credit card should be paid off in full soon after you make the purchase. Get your points / cash back / etc and never allow a balance to hit the statement. The real value of the card is in the points/cash back.
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If you have a bunch of recently opened cards with like $500-$1000 credit limits, that’s not great, but if you have several high limit cards that you are only using a small percentage of that limit, that is good.
Correct. Credit scores are bullshit.
The idea is fine, but when they’re run by the credit bureaus, they’re subject to extreme corruption. Even if run by the government, as they should be, they’d be subject to extreme corruption.
Can you elaborate? And excluding all the bullshit with leaks, that’s obviously an issue but I’m not sure it’s related.
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What will blow your mind is that there is now an insurance score that insurance companies use similar to a credit score.
What’s it used for? Determining how much you use the insurance you pay for? Any more info?
As far as I understand it, yes. It’s used to determine whether you’re insurance worthy and at what rates you will pay.
Probably a good thing. I have a relative who claimed in her homeowners insurance for all sorts of things, then just shopped companies when they raised rates. Definitely an abuser of the system.
Meanwhile I tried asking mine for guidance on when to make a claim and it sounded like “any time you want, then we’ll accept it or not and decide how much to raise your rates”, and I was warned by friend they may track questions like that to use against your claim or to raise rates before a claim. So if each, abuse all around
1989? Blame Taylor Swift
Here is an alternative Piped link(s):
nineteen eight-nine was a dream in a dream
Piped is a privacy-respecting open-source alternative frontend to YouTube.
I’m open-source; check me out at GitHub.
The whole financial system is only about 50 years old
I will just leave this here. Your employers can snitch on you as well and just give all of your paystubs to…Equifax. It was shocking to see which ones did and which ones did not.
The first time I saw this I was shocked. Every single paycheck of mine is there and there’s basically nothing you can do about it without having negative credit impacts for having manually disabled it. Why on earth is this opt-out rather than opt-in? Then it wouldn’t look like you’re trying to hide something if you value your privacy at all.
It’s crazy this is legal. So dystopian.
I disabled that shit the moment I found out a few years ago. As far as I know it is only potentially an issue if a landlord or something wants to see it and isn’t tied to your credit score. I don’t give a shit right now anyways as my credit is good enough. If I need to give someone access to it, and it makes sense, sure, but I would rather hand over a copy of my W2 or paystubs personally.
It is entirely messed up that it exists and most people don’t even know about it. Dystopian nightmare indeed.
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When you opt-out with Experian, your information is not deleted from the Experian marketing database. Experian will mark your record as “Do Not Online Target” for a period of five years. You can renew your opt-out request after this five-year period. If Experian removed your information completely, we would have no way to know your preference.
What the fuck kind of bullshit is that? No way to know my preference? How about never! Thank you for letting me know that I have to write another email today and try not to lose my shit. Maybe I will setup an automated message to go out every year or something to “remind” them.
They should write it as “you must allow targeted advertising at least once every 5 years before submitting a new opt-out request for the next 5 year period”.
So dumb this is legal, I just sent my email.
Also keep in mind that there are far more than three of these companies. There are dozens of not hundreds of less visible companies doing the same kind of consumer data brokering. The “big three” are just the face of the industry. They only make it easy to opt out because they know you’re captive to 20 other feed through companies.
Credit scores have existed for decades, as the article states. It’s specifically the FICO system that was started in 1989.
Yes, credit scores have existed for 150 years.
But the system of predetermining how deserving you are based on your race or other circumstances beyond your control centralized within a few firms making money off of that data? That’s new and that’s b*******.
Did you mean bullshit? Are you 5?
Shut up mom i HATE you
Yes. No.
bAnANas
