[HN Gopher] Credit Scores Can Run - and Ruin - Our Lives
___________________________________________________________________
Credit Scores Can Run - and Ruin - Our Lives
Author : pseudolus
Score : 169 points
Date : 2022-05-25 10:04 UTC (12 hours ago)
(HTM) web link (thewalrus.ca)
(TXT) w3m dump (thewalrus.ca)
| danuker wrote:
| > It took two years for her old credit score to be reestablished.
| Two years of faxing in detailed documents--including Dave's death
| certificate--only for the mistake to reappear. During that
| period, her life was effectively stalled. She considered moving,
| as it was painful to stay in the house she had shared with her
| late husband, but having a credit score stuck at zero meant she
| couldn't get a new mortgage.
|
| Indeed, these glitches have the potential to ruin people's lives.
| Reminds me of Kafka's "The Trial".
| fleddr wrote:
| Here in the Netherlands we have a simpler system.
|
| Any non-trivial credit such as your mortgage, car loans and
| student loans are registered centrally at an institute called the
| BKR. When you regularly fail to make payments on these loans, you
| may be marked with a negative rating.
|
| So it's fairly binary information: good or bad.
|
| Over here, day to day payments are done with debit, so no
| detailed "small credit" history is recorded at all.
|
| In my case, this BKR institute has a single entry, my mortgage,
| and soon none at all. So I'd then have no registered credit at
| all, and thus also no score.
|
| ...which is celebrated by creditors. A complete lack of data is
| interpreted as you being the most financially sound person
| possible. This high trust culture doesn't come out of nowhere.
| Culturally, payment discipline overall is very solid as we have
| somewhat of an anti-loan culture (don't live beyond your means).
| Further, you're not going to get away with defaulting on loans,
| there's no mercy for it here.
| waynesonfire wrote:
| to play devils advocate, it can also do the opposite as it lowers
| rates for responsible folk, especially for responsible struggling
| folks.
| banannaise wrote:
| Credit scores for people who are responsible and struggling
| will be much closer to the scores of those who are
| irresponsible, rather than those who are responsible and not
| struggling. For the most part, the credit system expects
| perfection, so if you're out of work for several months and
| need to keep yourself fed, you're going to earn a black mark
| that will be a lot of work to counteract.
|
| Even if you manage to keep it spotless, credit scores still
| give a lot of weight to "having access to a lot of credit, and
| not using it", or "having a mortgage that you've been paying
| consistently for years", both of which mostly require you to
| already have good credit to get.
| teddyh wrote:
| http://www.threepanelsoul.com/comic/credit-rating-agencies
| Tycho wrote:
| I'm surprised that credit scores are even legal, to be honest. I
| wonder if there's been any class action lawsuits.
| whywhywhywhy wrote:
| Can't believe it's legal or that people happily participate in
| this complete scam.
|
| If I never borrow money and survive on my own terms my score
| should be perfect. Instead I'm marked down for never risking
| getting in to debt.
| kube-system wrote:
| That's simply not logical. The absence of responsibility is
| not a demonstration of responsibility.
| sokoloff wrote:
| For me, the pull quote about 40% of the way down the article is
| key. ("A credit score, at its most basic, is a predictive model
| of behaviour.") It seems fairly obvious that there's a lot of
| possible efficiency (read "cheaper and more accessible credit
| in aggregate" as the consumer benefit) to be had if implemented
| correctly.
|
| Lenders want to lend money to people who will pay it back as
| agreed. Lenders want to avoid lending money to people who will
| not (or want to charge an amount sufficient to cover their
| increased risk and costs). Borrowers want to borrow money at
| the cheapest possible terms. A system that correctly predicts
| who is likely to pay back borrowed funds as agreed serves both
| borrowers and lenders. That means it's unlikely that it should
| be made outright illegal.
|
| Regulations around data quality, challenging suspect data,
| removing erroneous data, how long correct-but-negative items
| can stay on the report, etc. are entirely appropriate of
| course.
| p49k wrote:
| > A system that correctly predicts who is likely to pay back
| borrowed funds as agreed serves both borrowers and lenders.
|
| Such a system can't be built without being unfairly biased
| against some people who don't fit a certain mold, and thus it
| should be illegal.
|
| Most of Europe has a much simpler system: Your ability to
| obtain credit is based on the past several years of income,
| with a penalty for instances over the past ~7 years in which
| you didn't pay back debts. That's it; no predictive modeling
| or scoring or other nonsense; everyone has an even chance at
| credit.
| MadeThisToReply wrote:
| > Your ability to obtain credit is based on the past
| several years of income, with a penalty for instances over
| the past ~7 years in which you didn't pay back debts.
|
| Okay, and using these inputs, what function is applied to
| determine whether or not to grant the loan? How does that
| system differ from a "credit scoring" system, apart from
| that your perceived ability to repay isn't explicitly
| mapped to a single variable?
| gommm wrote:
| The European system is not the panacea you make it out to
| be. I'm French, I lived abroad for most of my professional
| life, when I came back to France after 14 years of living
| abroad, no banks would give me access to mortgages, I also
| wasn't able to rent most apartments because I had no
| history of working in France and I was a freelance
| contractor so I didn't have a fixed long term contract.
|
| In France at least, contract workers and entrepreneurs have
| poor access to mortgages compared to people who have a long
| term contract (CDI).
|
| Instead, I haven't really lived in the US besides a short
| stint as a student there a long time ago. But despite that,
| I have credit cards in the US and have a good enough credit
| score to be able to get a mortgage.
|
| I actually prefer the credit score in the US, it's
| relatively easy to manage, there's quick feedback as to how
| well you are doing (much less opaque than what's there in
| Europe) and it's more flexible for people not fitting the
| mold.
| SkyBelow wrote:
| >Such a system can't be built without being unfairly biased
| against some people who don't fit a certain mold, and thus
| it should be illegal.
|
| Where is the difference between this and any other time
| where a choice to offer a contract or not occurs? If you
| are hiring, no matter your interview process, you are
| looking for a certain mold and good workers who don't fit
| that mold will be discriminated against. When renting, same
| thing. When picking a contractor to do a job, same thing.
|
| >Your ability to obtain credit is based on the past several
| years of income, with a penalty for instances over the past
| ~7 years in which you didn't pay back debts.
|
| Which is still a certain mold predicting future performance
| based on past behavior. What about someone who has had poor
| income and many poor payments but who has just turned their
| life around and will have great income and be payable and
| willing to pay off any future debts. You are still
| discriminating against them because most people with a
| similar history won't have a similar positive outcome.
| sokoloff wrote:
| "Instances over the past ~7 years in which you didn't pay
| back debts" is used _precisely because of its value in
| predictive modeling_ your likelihood to pay back
| prospective new debt.
| zo1 wrote:
| Maybe I'm missing something, but you just described a
| credit score system.
| mortenlarsen wrote:
| Yes. But we don't have the stupid gaming aspect where
| people take on debt that they don't need in order to
| "build a credit" score.
|
| It is only a proof of income, outstanding debts (that you
| are required to reveal), and the hopefully lack of past
| non-payments that count. You can't "build your" score buy
| using a bunch of credit cards and paying every month.
|
| I live in Europe, and do not have a credit-card (only
| debit) have no need for credit, since I do not spend
| money that I do not have.
|
| If I was in the US, I would probably have a credit card
| to "build my credit".
|
| It is like if I asked my neighbor to lend me money every
| month and pay them back a second later to build their
| trust. It is just a stupid game, with no real meaning.
| bombcar wrote:
| I suppose the difference is that the bank has to refuse
| you in the EU system, instead of pawning the refusal off
| to a third party that does the calculation.
| sokoloff wrote:
| In the US, the refusal is still from the lender, based on
| information from zero or more credit reporting agencies.
| bombcar wrote:
| Yeah, but they always word it as blaming the agency.
| sokoloff wrote:
| That is likely a consequence of a requirement of the Fair
| Credit Reporting Act under which you must be told when
| information in your credit file is used against you to
| deny your application for credit, employment or
| insurance.
|
| I haven't been denied in a long time, but my recollection
| was the refusal was from the lender and included "we may
| have used information from <reporting agencies>; here's
| how you can get a free copy of the information in your
| file..."
| galoisscobi wrote:
| This is a really good explanation as to why my credit score
| dropped by ~30 points each time I finished paying off a
| student loan early.
| xeromal wrote:
| The drop is usually temporary anyways. Credit scores are
| best seen as an average similar to looking at your weight.
| If you weigh yourself every day, you're going to get a
| different weight every day. Same with a credit score. Best
| to look at the change over time.
| usrn wrote:
| Racial stereotyping is, in it's most basic form, a predictive
| model of behavior. It's also illegal in nearly any
| financially meaningful situation.
| [deleted]
| jimmaswell wrote:
| What do you propose? Everyone gets a loan, no questions asked,
| no consequences for anything?
| maxerickson wrote:
| The US has extremely weak privacy rights.
| kube-system wrote:
| Credit reporting exists nearly everywhere. Regulations vary
| by region, but the general collecting and reporting of credit
| information is legal most places.
|
| Many of the places where people think they don't have a
| "credit score" are just places where credit worthiness is
| quantified differently, or local regulations don't have the
| same transparency requirements that exist in the US.
| tediousdemise wrote:
| As intended. There is no better way to influence someone's
| behavior than when they have the feeling of constantly being
| watched. It's about control.
| maxerickson wrote:
| Intended by who or what?
|
| Like if there is some entity that just gets what they want
| it doesn't really matter that you feel controlled, because
| you are.
| kube-system wrote:
| Credit scores are just math, applied to your credit history.
| What about that is surprisingly legal?
| Tycho wrote:
| If I wanted to start a business that would involve collating
| the private financial transactions/history of individuals and
| then sharing it (via a summary statistic) with clients in a
| context where there might be adverse consequences for the
| individual, without them granting permission, I would expect
| to get laughed out of the licensing office.
| kube-system wrote:
| Maybe you'd be surprised then. There are many consumer
| credit operations in the EU, operating under GDPR.
| kkfx wrote:
| Neoliberals want a society of Ford-model obedient workers-
| subject-citizens to master them as a shepherd keeps his flock,
| since most humans actually obey but only "a certain bit" they
| invent ways to judge humans like a farmer who price his
| livestock as a way to reach such obedient flock they dream.
|
| The "class action" should be a public imposition against such
| scoring simply saying in Democracy People rules, we rule that
| no such things is allowed, you are a minority who can obey or
| being crushed. But since we are not in Democracies, they are
| just corporato-dictatorships dressed as formal, not
| substantial, democracies and most are not Citizens but just
| subjects...
| javagram wrote:
| It's regulated and allowed by law.
| https://www.investopedia.com/terms/f/fair-credit-reporting-a...
| legalcorrection wrote:
| Credit scores from the major credit bureaus are such a big deal
| because handing out credit on an ad hoc basis is de facto
| illegal. You will be sued and accused of discriminating against
| black people. You will probably lose, or spend enough money on
| legal fees to have lost anyway. To defend against that, you
| have to make the process as rigid and impersonal as possible.
| The best approach is to use the government-blessed credit
| bureaus.
| solarkraft wrote:
| The joke behind that is that there's just as much
| discrimination, just hidden behind some intransparent
| algorithms.
| legalcorrection wrote:
| Making the process rigid and algorithmic helps make sure
| that you aren't using race itself as a variable in your
| analysis, but it doesn't change facts about the world.
| Black people have lower credit scores because as a group,
| they are less likely to pay their bills on time or at all.
| But because race isn't considered as a factor, a black
| person who _is_ financially responsible is not dinged just
| because other black people aren 't.
| pessimizer wrote:
| And we play superior to China and their "social credit"
| although the US/UK/Canada/Germany are the only places that
| allow something similar.
| kube-system wrote:
| Not true. The big "US" credit bureaus have operations all
| around the globe, and there are many regional players in this
| market too.
|
| https://en.wikipedia.org/wiki/Credit_bureau#List_of_credit_r.
| ..
|
| "Social credit" is an entirely different thing.
| LatteLazy wrote:
| Is it true that one reason the US has such a strong credit score
| system is the lack of reliable data on who people are?
|
| In the UK we have credit scores, but they're pretty irrelevant.
| What matters here is being able to show who you are (a matter of
| looking you up on things like voter lists) and you never having
| been taken to court for your debts (County Court Judgements).
|
| In fairness we also have a lot less unsecured debt and a much
| more punitive bankruptcy system...
| kube-system wrote:
| You have to know who someone is to look up their credit in the
| US, so that's not the reason.
|
| I'm guessing the biggest reason is your latter point -- it is
| very easy to get a lot of credit in the US and relatively easy
| to have it forgiven.
| bryans wrote:
| There are actually very few regulations regarding the credit
| score "system" -- if it can even be called that -- and it shows.
| The system is grossly abused by everyone involved, and typically
| the only people experiencing the effects of that abuse are
| already in the most vulnerable positions. It's quite
| reprehensible what humans are willing to do to each other over an
| unpaid bill, almost universally representing a completely non-
| relevant amount of revenue for the companies. How many lives have
| been disrupted or ruined over sending $15 to collections?
| kube-system wrote:
| Because it's just math applied to the highly regulated credit
| _history_ system. The way that the score is calculated is
| inconsequential, as long as the underlying credit history is
| correct.
| bluedino wrote:
| You never opened a single account other than that? You in
| essence have no credit, then.
| [deleted]
| pessimizer wrote:
| It was a prelude to the modern private surveillance industry.
| Virtually any legislation affecting that would effect the
| credit rating agencies.
| kome wrote:
| Credit Scores in the USA is basically developed into a social
| score. No European countries (with the possible exception of the
| UK) use a similar system. I wonder why Americans just keep going
| for it.
| mcntsh wrote:
| > No European countries (with the possible exception of the UK)
| use a similar system
|
| There's SCHUFA here in Germany
| csunbird wrote:
| Yup, and you are not able to even rent a house without a
| positive score.
| ramesh31 wrote:
| >I wonder why Americans just keep going for it.
|
| We trade one for another; there's no social caste, royalty, or
| nobility here. Your worth as a human being is determined
| entirely by the sum of your assets.
| jimmaswell wrote:
| You don't need a vault of gold to have a good credit score.
| All you have to do is have some credit and use it
| responsibly. Too much for some people to handle so they decry
| it as unfair.
| nisegami wrote:
| The credit score system benefits the ones who have the most
| power to change it. That's why there's no real motivation to
| remove it.
| mcntsh wrote:
| I've been working since I was 16 years old and I've had sparkling
| credit my entire life. I pay my cards in full every month; never
| missed a payment for 10+ years, paid off my car early.
|
| I moved abroad and forgot about a $30 dollar balance with AT&T
| which brought my FICO score to 600. One 30 dollar bill means I
| can no longer qualify for a mortgage or a car payment or
| anything.
| daniel-thompson wrote:
| A grey-hat method of dealing with this would be to dispute it
| with Equifax, TransUnion, and Experian and choose a plausible
| dispute reason ("I never knew about it" or whatever).
| Regardless of the merits of the claim, it's likely their
| "investigation" will resolve in your favor and they'll just
| remove it (and your score will bounce back immediately).
|
| It doesn't necessarily feel great... but remember that you're
| literally just a number that they couldn't care less about.
| FireBeyond wrote:
| When I was going through the mortgage process, my broker
| recommended a credit repair company, whom I learned had three
| broad purposes (the reason I mention this is in point three):
|
| 1. Relieve the psychological / emotional stress of debt
| collectors hounding you by redirecting that to them.
|
| 2. Offering to settle debts. Realize, though that "Paid in
| full" and "Settled in full" are different statuses to a CRA.
| And both have an entirely negligible impact on improving your
| credit score - the damage is done when the negative tradeline
| is reported. HOWEVER, for mortgages, there's some merit in
| resolving this. "Yes, it got to that point, but I did take
| care of it" is better that "Yes, it got to that point, and
| then I continued to ignore it."
|
| 3. How do these agencies also "improve" your credit? They
| dispute every negative tradeline, regardless of accuracy. If
| the tradeline isn't verified (because smaller/more manual
| agencies don't have the time/inclination, especially if
| they've got their money now), it is removed, like it never
| happened. If it IS verified? They dispute it again. And
| again. In the hope that at some point the creditor will fail
| to meet the verification requirements. Nothing magic.
| brundolf wrote:
| At some point, when a system is so broken and unjust, I think
| it's no longer unethical to exploit it given the opportunity
| bondolo wrote:
| When was it ever just or working?
| ryathal wrote:
| I doubt this would work. Credit reports are for lenders, and
| credit bureaus side with their true customer.
| PascLeRasc wrote:
| If this doesn't work, submit another dispute around
| Thanksgiving - the creditors have 30 days to respond before
| it's automatically resolved in your favor. In my experience
| it does actually feel good to do this.
| bcassedy wrote:
| I've had a similar experience when changing mobile provider.
| For whatever reason it seems like that last bill posts late and
| never shows up. In the past I didn't have autopay turned on so
| I just didn't even know about the debt until I started getting
| letters from collections firms 6 months later.
|
| I imagine that these last bill things end up dinging a lot of
| people's credit. Luckily I've paid them when I find out about
| them and my credit bounces back once the payment in full is
| reported.
| goatherders wrote:
| Pay it off. Wait a month. You'll be fine.
| mcntsh wrote:
| It went to collections. That stays on your credit for 3-5
| years.
| bluedino wrote:
| Other creditors are worried you would move abroad and
| forget to pay them for years.
| mcntsh wrote:
| For sure it's a valid concern and warrants a mark on my
| record probably but a 30 dollar bill after 10+ years of
| pristine activity basically removing my ability to take
| out a loan is a little unfair.
| bryans wrote:
| That's actually not true. If you pay the collection agency,
| the derogatory mark gets removed within weeks. You also
| typically only need to pay half the amount. If they try to
| get you to pay the whole thing, just tell them you're using
| your tax refund to pay off debts, but you only have $X
| left, where X is half the amount owed.
| alostpuppy wrote:
| That's not my experience. The only derogatory items on my
| credit report are medical debts I have long since paid
| off.
| bryans wrote:
| You have the legal right and ability to remove any mark
| if you've paid it off. Both of the agencies have online
| options for removal requests.
|
| https://www.experian.com/disputes/main.html
|
| https://www.transunion.com/credit-disputes/dispute-your-
| cred...
| goatherders wrote:
| Incorrect. Pay it off in full. They will report that to the
| credit folks and it will be removed.
| valeness wrote:
| This is patently false. They will remove it if they are
| feeling particularly jolly when you call and ask. But
| they are under no obligation to do so and they have
| denied this action to me before.
| goatherders wrote:
| Rephrase: my credit was a disaster in my 20's. I paid off
| dozens of collections accounts in my 30s. All of them
| were removed.
|
| My personal experience has been that it is 100% true
| that, if paid in full, the item is removed.
|
| Better?
| gaadd33 wrote:
| They do have to mark it as paid at least under the FCRA
| if you are in the US.
| parkingrift wrote:
| I've been in this situation and you can make repayment
| contingent upon deleting the negative remarks. As in you
| send me a letter certifying you'll delete the remark, and
| I will remit payment.
|
| If they refuse then you can just refuse to pay until they
| relent. Their only alternative is to take you to court or
| sell to the next collection agency down the line.
| Creditors and collection agencies won't take that action
| except as an absolute last resort.
| FireBeyond wrote:
| One of the challenges with this is that technically the
| TOS between a creditor and the CRA forbids the practice
| of "pay for delete". So you may get lucky, but
| oftentimes, you may not.
| roflyear wrote:
| This is incorrect. They do not have to remove it. They
| can, if you ask nice, but they do not have to.
| throwaway98797 wrote:
| credit scores recover quick
|
| you could cause six figure loses to a bank by short selling
| your home and still have workable credit within 2 years
| Mezzie wrote:
| I declared Chapter 7 two and a half years ago and I currently
| have a score in the mid-700s. Granted, my bankruptcy was due
| to medical stuff rather than irresponsibility.
| leet_thow wrote:
| I had a similar thing happen to me. I disputed the charge via
| Credit Karma, explaining that the service never worked so I
| never paid. It was removed within a few days.
| upupandup wrote:
| for me it was AWS/DO billing. I lost the original phone
| number/email attached to it which makes it impossible for me
| to login to that account.
|
| I just no longer rely on credit or use credit cards anymore.
| I buy everything with cash.
|
| Funny enough my bank is constantly calling me that they can
| lend me money.
|
| Our modern Credit/interest/rent system is parasitic at best.
| In some cultures, it is deemed immoral and outright banned.
| However I don't know what the alternative is. Who would lend
| money without any expectation of return? Who would buy bonds
| if they cannot sell it for a higher price?
| simonswords82 wrote:
| I find it abhorrent that organisations (Experian/Equifax) who I
| have never directly done business with have a license to collect,
| use and sell my very personal information for financial gain.
|
| I had hoped with the implementation of GDPR I would be able to
| write to these con artists and ask them to remove my information
| but alas apparently my personal right to object does not
| automatically mean they have to stop processing my data see more
| here:
| https://help.equifax.co.uk/EquifaxOnlineHelp/s/article/Howdo...
|
| The whole arrangement is a total scam.
| bondolo wrote:
| Do credit scores and the costs of borrowing associated with
| specific scores correlate to the actuarial risk of default or is
| it just a huge scam to justify usury? What is to stop them from
| charging twice as much for 2% additional risk? "It is not our
| fault you have less than perfect credit"
| TrackerFF wrote:
| Here in Norway, we don't have any credit score in that sense.
| Rather, we have sort of a "credit history" system, which shows
| the following:
|
| -When there's been registered wage garnishment (by court) against
| you.
|
| -When there's been registered a lien against your property.
|
| -When you've entered a court-ordered debt payment program.
|
| -When you've been registered as bankrupt.
|
| And by law, these things have to be deleted when you've settled
| your debt. In any case, it's difficult to get those things by
| accident. Usually you're at the end of the process, and have been
| through civil court.
|
| With that said - it should be mentioned that Norway is a
| INCREDIBLY creditor friendly country, as far as the law goes. If
| a creditor really want their money back, they can / will take you
| to court, and eventually get a garnishment on your wage or
| welfare money. Or property/vehicles/personal belongings lien if
| you don't have any income.
|
| I like the system as it is. I really don't like the idea of
| constantly having to do things with respect to a credit score -
| and I'm not talking about gaming the system or being a deadbeat,
| but trying to maximize my credit score for the sake of keeping it
| high.
| marvin wrote:
| I was about to point out the obscene creditor friendliness of
| Norway when I saw you extolling the virtues of our credit
| system, so I'm glad you did it first. The part of fairly
| tracking poor payment history is good, the rest, not so much.
|
| We effectively have a form of wage slavery by law. If a person
| has debts that are unpayably big and is not (or no longer)
| eligible for the once-each-lifetime-only "personal bankruptcy",
| where one signs a contract to pay all property and incomes for
| five years towards one's debts before the remaining is erased,
| one is on the hook for the remaining debt for the rest of one's
| life.
|
| No recourse. Economic damage judgements in court do not qualify
| even for the five-year 100% garnishment contract. Someone
| impacted by this has no incentive to work ever again, because
| everything they earn above the survival minimum will be
| garnished. I'd hazard a guess that most of them end up on
| welfare.
|
| So it's not all good, unfortunately. I mentioned social unity
| punishments in our culture in a different thread the other day;
| this is another example of that.
| gruez wrote:
| >If a person has debts that are unpayably big and is not (or
| no longer) eligible for the once-each-lifetime-only "personal
| bankruptcy"
|
| source for bankruptcy being "once-each-lifetime-only"? A
| quick search says that's false:
| https://www.findlaw.com/bankruptcy/after-bankruptcy/how-
| ofte...
| kube-system wrote:
| The US has very forgiving bankruptcy code, notably so. Much
| of the world is less forgiving.
| kleinsch wrote:
| They're talking about Norway, which doesn't follow US
| bankruptcy code.
| TrackerFF wrote:
| He's was quoting me and referring to here in Norway, not US
| - where it is very much a one-time deal.
|
| Over here, we can't really just "declare bankruptcy", it's
| a very lengthy process - which takes years. It's more like
| a court ordered program where the debtor and creditor
| agrees that the debtor is going to pay as much as possible
| towards the debt owed, for the next N years, and after that
| - all debt is erased. You're allowed to keep just enough of
| your salary to cover the most basic living expenses,
| everything else goes to the creditor.
|
| This also means not being credit worthy, which in turn
| could mean no cellphone plan, no insurance, no mortgage, no
| auto loans, no consumer loans, etc. Everything you buy, you
| have to buy with cash up-front.
|
| From start to finish, all that could take 5-10 years. And
| before you even sign a contract where you and the creditor
| agrees upon such a plan, the debt collection agencies are
| probably hounding you down on a daily basis, making
| whatever debt you had to begin with N times more expensive.
|
| The good news is that when you've held up your end of the
| agreement, it's gone. But you only get once chance. If you
| - for whatever reason, any reason at all - end up in the
| same situation, you're practically a debt slave. Which
| could mean wage/welfare garnishments for the rest of your
| life. This is especially true if you have multiple debt
| collection agencies bogging down individual debts with
| added and compounding fees.
|
| But to be fair, this is not normal. Very few end up being
| two-time losers - but sadly it could be entrepreneurs and
| small business owners, if they haven't structured their
| companies the right way.
| buescher wrote:
| When you hear Europeans get horrified that in the USA a
| medical problem (or whatever) could drive you into
| bankruptcy, this is the context. They are usually more
| horrified than you might realize, because there is a bit
| of miscommunication going on.
|
| Can you inherit debt in Norway? You can in Germany. You
| don't in the USA.
|
| Can you as a Norwegian declare bankruptcy in the UK or is
| that off the table now that they're out of the EU?
| 2rsf wrote:
| More or less like Sweden, and everything is digitally
| interconnected to the main population registry so things like
| that usually don't happen:
|
| > TransUnion, one of Canada's two main credit bureaus, had
| reported her as deceased.
|
| We also moved out of the stone age and faxes practically don't
| exist and all certificates are digital:
|
| > Two years of faxing in detailed documents--including Dave's
| death certificate
| [deleted]
| josephcsible wrote:
| > And by law, these things have to be deleted when you've
| settled your debt.
|
| So if I paid off my debt on time, and you made your creditor
| fight tooth and nail for five years and get a court judgment to
| get your debt paid (but it is paid now), future lenders would
| have to treat us the same?
| sgjohnson wrote:
| > trying to maximize my credit score for the sake of keeping it
| high.
|
| Just being a deadbeat will do exactly that. It takes 0 effort.
| Put your purchases on a credit card, and settle it in full
| every month.
| Nextgrid wrote:
| > Put your purchases on a credit card, and settle it in full
| every month.
|
| If you don't need credit then taking on credit is an extra
| thing to manage. I personally like all my spending being on
| my _debit_ card and coming out of my account so I have a
| single balance that reflects how much money I have. I don 't
| want to deal with an extra company especially when their
| business model ultimately relies on trying to get me to miss
| a payment so they can charge fees/interest.
| maxerickson wrote:
| Their business model is a 1 to 3 percent fee on every
| transaction they are involved in. My credit card company
| sends me a notification when a statement is ready and
| another friendly reminder a week before the bill is due.
|
| They make money on interest also, but they would rather
| have someone that spends and pays off a lot than someone
| that carries a modest balance.
| Nextgrid wrote:
| > Their business model is a 1 to 3 percent fee on every
| transaction they are involved in.
|
| In Europe and the UK, interchange is capped to a level
| that wouldn't support running a financial institution.
|
| > They make money on interest also
|
| Interest only gets charged a month after (at least on
| most UK credit cards), so if you're using it "the right
| way" and paying it off every month you will never incur
| any interest. It's good for you but ultimately proves
| that credit card providers rely on the (generally less
| financially-savvy) people who don't/can't use it "the
| right way" and incur interest or fees. That's honestly a
| pretty predatory business model I have no interest in
| supporting.
|
| > My credit card company sends me a notification when a
| statement is ready and another friendly reminder a week
| before the bill is due.
|
| True but why should I even statements and bills for
| spending what is _my_ money in the first place? My
| argument is that you should only use a credit card when
| you actually need _credit_ and not to merely game a
| broken system.
| maxerickson wrote:
| The article is about North American credit scores, so I
| guess it isn't completely ridiculous to assume that if it
| is unstated.
|
| Does your bank not have a system showing you what
| transactions you did in a month? The credit card
| statement is the same thing, for a different account.
| sgjohnson wrote:
| > My argument is that you should only use a credit card
| when you actually need credit and not to merely game a
| broken system.
|
| Credit cards are literally the dumbest way to borrow
| money, second only to payday loans. So you definitely
| shouldn't use them when you _actually need credit_.
|
| But you should use them to build up your credit score, so
| you can get extremely cheap credit when you actually need
| it.
| 2rsf wrote:
| That. I was addicted to credit cards and small payments but
| now I pay everything debit, cash in other words, and life
| became much more simple and predictable
| is0tope wrote:
| While I see your logic, ultimately using a credit card
| makes a lot of sense as long as you pay it off on time. Not
| only do you get the (small) benefits of the cashback or
| points, but you have added fraud protection also.
|
| Not sure how it is where you are, but where I am the
| payment is automatically done every month from your bank
| account. There is 0 chance of missing a payment, as long as
| you have a sufficiently positive floating balance in your
| account. If someone do not, then I would question their
| suitability for a credit card in the first place.
| bee_rider wrote:
| These companies are making money somehow. If they are
| exploiting people more clever than me, then I'll probably
| fall for it too. If they are exploiting people less
| clever than me, seems pretty evil, I don't want anything
| to do with that.
| CPLX wrote:
| How they are making money isn't a secret. They take a
| percentage of the transaction from the merchant you pay
| every time you make a charge. It's effectively free from
| your perspective, the merchant is willing to share some
| of your money to allow you the convenience of paying by
| card.
| Nextgrid wrote:
| > Not only do you get the (small) benefits of the
| cashback or points
|
| Maybe in the US - in Europe where interchange is capped,
| credit card rewards aren't worth it. Not to mention, I
| like my privacy and don't want to deal with any rewards
| or offers programs anyway.
|
| > but you have added fraud protection also.
|
| In practice, all the fraud I've been victim of always fit
| within the card networks' dispute resolution rules. The
| only time I can think of this being necessary is airlines
| that go bust (where a card network dispute would
| technically succeed but fails because there's literally
| no money to claim back anymore).
|
| > where I am the payment is automatically done every
| month from your bank account. There is 0 chance of
| missing a payment, as long as you have a sufficiently
| positive floating balance in your account. If someone do
| not, then I would question their suitability for a credit
| card in the first place.
|
| See my other comment here:
| https://news.ycombinator.com/item?id=31504046
| jsmith45 wrote:
| > In practice, all the fraud I've been victim of always
| fit within the card networks' dispute resolution rules.
| The only time I can think of this being necessary is
| airlines that go bust (where a card network dispute would
| technically succeed but fails because there's literally
| no money to claim back anymore).
|
| Does the dispute process have all disputed money be
| instantly returned to the account? With a credit card,
| you can simply turn off the auto payment system, and
| simply not pay the fraudulent part, and you still have
| your money in the bank account. With a debit card, in the
| US the banks typically have 10 business days to determine
| if there was fraud and give your money back. (If the
| investigation takes longer they return the money on the
| tenth business day pending the results of the
| investigation, and if they determine it was not fraud
| they will take the money back again.)
|
| And in the US many people life paycheck to paycheck with
| effectively zero savings. If their account is zeroed out
| due to fraud, Things can get expensive quick.
|
| For example, your rent payment is probably too large to
| be covered by banks overdraft protection, so you will
| likely get hit with three bounced check fees. of at least
| $25. One from you bank from the first attempt. Then a
| later re-presentment attempt will also fail, and you will
| get a second fee from your bank. Finally, you will get a
| bounced check fee from your landlord. Of course since
| your payment did not go through, you will likely end up
| with a late fee. etc.
|
| For other bills they could be small enough that you only
| get hit with overdraft fees, and not the rest. But if
| not, then things can snowball VERY quickly. And There
| could be other consequential damages like losses from
| being unable to get certain items while they are on sale,
| or even things like the stress of all of this preventing
| you from closing a sales deal, meaning you lose out on a
| substantial commission, etc.
|
| And while you can typically get the bank imposed fees
| waived due to the fraud, as long as they can determine
| that you would not have suffered those fees if the money
| had been there, the bank won't always cover all the the
| incidental and consequential damages. (The terms of
| service always exclude those).
| gruez wrote:
| >> but you have added fraud protection also.
|
| >In practice, all the fraud I've been victim of always
| fit within the card networks' dispute resolution rules
|
| I think there's an element of "fraud protection" that
| you're missing. If your debit card gets breached and
| someone racks up $2000 worth of charges on it, the $2000
| is immediately gone from your bank account. If rent/bills
| are due soon, that might be bad. On the other hand if you
| have a credit card, you have at least 3-4 weeks since the
| bill is issued before you have to pay, which means 3-4
| extra weeks to get it resolved/refunded without having it
| affect your finances.
| sgjohnson wrote:
| > Maybe in the US - in Europe where interchange is
| capped, credit card rewards aren't worth it. Not to
| mention, I like my privacy and don't want to deal with
| any rewards or offers programs anyway.
|
| Not if you have an American Express card. Interchange is
| capped only if there's more than 3 parties to the
| transaction, which is not the case on AmEx.
| xeromal wrote:
| I don't like anyone having access to my bank account so I
| tend to see a credit card as an abstraction. If someone
| skims my debit card, that's my problem. If someone skims my
| credit card, that's my credit card's company's problem.
|
| I don't give out my debit card and I only use it at trusted
| ATMs.
| EliRivers wrote:
| Do you not have an option to just automatically have the
| full amount paid off from your account every month? I've
| never had to do anything involving paying a credit card; on
| getting the card, I tell them to just take the full amount
| every month from my bank and that's what happens until
| years later for whatever reason I cancel the card. They
| might well like me to miss a payment so they can charge me
| interest, but it's never going to happen.
|
| This is a genuine question; I know that other countries do
| things differently. Is that not an option where you are?
| Nextgrid wrote:
| It does, but that payment takes several days to clear and
| messes up your bank's analytics. I use a modern bank that
| gives me a real-time overview of my spending and
| categories it, but this all goes out the window if all
| your spending is on a credit card and the only thing your
| bank sees is a single payment (to your credit card
| provider) once a month.
| gruez wrote:
| >I use a modern bank that gives me a real-time overview
| of my spending and categories it
|
| You depend on your bank for this type of stuff? Isn't
| that basically begging for vendor lock-in? It makes far
| more sense to have a vendor-agnostic solution (eg. mint
| or personal spreadsheet), so your analytics aren't at the
| whims of your bank.
| Nextgrid wrote:
| I don't have enough money to care seriously about this
| yet, so I don't mind if my bank discontinues the service
| (and can reevaluate then). However, in the meantime it's
| there and it's convenient so I use it and the simplicity
| of my financial "stack" (one account for everything)
| makes it work well.
|
| A credit card would break that and introduce
| unnecessarily complexity including another company that
| I'd rather not have to deal with (also, I'm not aware of
| any _modern_ credit card providers that would give me a
| decent experience).
| nradov wrote:
| Almost every major US bank also issues Visa or MasterCard
| credit cards, and integrates spending on those cards into
| their account analytics.
| pnutjam wrote:
| Just a customer, but I use Cap1 and I can make a payment
| on my card and unless it's Fri/Sat/Sun, it will post to
| my bank the next day.
|
| It always shows as pending in the morning and clears that
| evening.
|
| I can also make a payment and it will update my CC limit
| the same day if needed.
| kube-system wrote:
| Does your bank not offer a credit card?
|
| Here in the US it is common for banks to both provide
| traditional banking services and credit cards, and when
| you open your banking app, both accounts are together.
| kzrdude wrote:
| I don't enable these bank analytics (sweden) since that
| accepts their laundry list of terms for that service,
| suddenly opening for the bank to mine that data. Without
| agreeing to it, I have more protection.
| jkaplowitz wrote:
| The vast majority of my monthly spending (with a few
| notable exceptions like mortgage and electricity bill)
| goes on a single credit card. That card's website and app
| also gives me an overview of my spending and categorizes
| it. What you say can work in the credit card world.
|
| And as the other commenter's reply says, all my credit
| cards pay me cash back or a points system which is
| redeemable for things with high cash value. There's a
| real quantifiable cost to not using them.
| teakettle42 wrote:
| Not a very modern system if it cannot account for a
| credit card.
|
| If you're not using a credit card, you're:
|
| - Adopting significant risk (debit card protections are
| not as strong as credit card protections)
|
| - Failing to establish a credit history
|
| - Giving away a significant amount of money.
|
| Credit card transaction fees are included in all prices.
|
| I use a card that gives me 2% cash back on all purchases
| -- effectively, most or all of the transaction fee.
| chociej wrote:
| Put some charity donations on autopay using a dedicated
| credit card, then configure the card to autopay the balance
| every month. Or, get hyperoptimal and set it up so that your
| overall credit card utilization stays at 1%, which is better
| under the FICO system than 0%.
| kube-system wrote:
| We don't have " _a_ credit score " in the US either. We have a
| credit history, much like you describe. For the businesses that
| review someone's credit history, the credit agencies provide
| some assortment of algorithms to help quantify it for them.
| This is colloquially called your "credit score", but in
| reality, there isn't a single credit score, there's a bunch of
| different algorithms and everyone uses a different one. The
| equivalent to a US "credit score" in Norway would be, a
| creditor's formula for determining creditworthiness from your
| credit history.
|
| The alternative to algorithmic scoring is often _worse_ :
| someone making a subjective judgement call. Which,
| historically, is fraught with discrimination.
| david927 wrote:
| No... we very much have a "credit score." I'm American and
| don't like credit cards. I have a shockingly low credit score
| simply because I choose to pay using debit cards and I don't
| take loans. I never miss a payment and I earn a very good
| living but you wouldn't guess that based on my credit score.
| In Norway my credit history would be golden; it's the
| opposite here.
|
| Edit: I stand corrected. Thanks, I understand now.
| gruez wrote:
| None of what you said contradicts the parent post, which is
| simply refuting the claim that we have some sort of
| "official" credit score. In reality we have credit history,
| and various data vendors apply your history to their models
| to determine a rating for you.
| bee_rider wrote:
| You have a credit history, which multiple companies will
| apply their algorithms to to get a score. The algorithm
| will take into account things like "this history doesn't
| have a lot of debt, so we don't know if they repay," and
| generate a lower score.
| jedberg wrote:
| > because I choose to pay using debit cards
|
| This is not a very smart way to do things. You'd be much
| better off getting a credit card with no fees and rewards
| points, buying everything with that, and then paying it off
| every month. You'll have stronger legal protections on your
| purchases, and you'll earn reward money without paying any
| extra. You can even pay off your bill with the reward
| points. And as a bonus you'll build up your credit score,
| which can affect you in lots of ways unrelated to loan
| rates.
| nebula8804 wrote:
| So I do this but I'm beginning to suspect the real reason
| they have all these rewards is partially due to data
| selling of spending habits. Usually when you get a new
| card there is a little slip that details what you can and
| cannot opt out of when it comes to data collection and
| selling to third parties.
| david927 wrote:
| I know but I hate the system and don't want to be bullied
| into participating.
| zhynn wrote:
| I wish i could afford to do what you are doing, but I
| can't survive in 2022 USA and support my family without
| access to credit. It is maybe possible, but it is wildly
| impractical. And the ability to borrow helps to smooth
| out the turbulence of life (unexpected emergencies or
| broken things). When I was in my 20s my credit was so bad
| I couldn't get loans and when life threw a curveball, it
| could take a ton of energy to sort out how I was going to
| deal with it. Now I just dip into the credit that I have
| available to deal with the situation.
|
| But I hate it. It feels insane to me that we as citizens
| don't have more regulatory control over credit systems. I
| envy you, but I also know that what you are doing is not
| practical for me.
| jedberg wrote:
| I mean, you do you, but you're really only hurting
| yourself here. You're literally throwing away money to
| stick it to "the system" which doesn't care.
| [deleted]
| kubanczyk wrote:
| david927 is not hurting himself, he's simply paying a bit
| more for a setup which prevents him from spending money
| he doesn't have. Understandable approach.
| waynesonfire wrote:
| doesn't take much to get some history.
| IncRnd wrote:
| > We don't have "a credit score" in the US either. We have a
| credit history, much like you describe.
|
| Not exactly. There are MANY credit scores in the US and
| several credit agencies. Different score calculations occur
| for different purposes, mortgages, credit card, automobile,
| and so forth. Plus there are different versions of each
| credit score's model. Each credit reporting agency keeps a
| separate credit file per person. Each person's credit file
| contains credit histories from various creditors. Not all
| creditors report to all credit reporting agencies. Not all
| credit reporting agencies receive the same information from a
| creditor, even when receiving information. The score for a
| particular person may differ between different credit
| reporting agencies, credit scoring models, or any of various
| other factors.
| kube-system wrote:
| You are just rephrasing what I said.
| IncRnd wrote:
| That's incorrect. Each borrower has multiple credit
| histories not a single credit history.
| throwoutway wrote:
| This is exactly why China implemented a "social credit" system,
| which is an authoritarian version of this kind of power.
| pessimizer wrote:
| If "authoritarian" here means virtually identical, except that
| they also include crimes and misdemeanors. I bet we could do
| that in the US if the oil on the slope was inclusion of "hate
| speech/crime." Hiring someone with a history of that is a
| liability, and lending to those people could lead to losses if
| they are fired.
| TuringNYC wrote:
| The US system is also authoritarian:
|
| - There is almost no easy way to fix bad problems. The fixes
| require huge bureaucracy that only highly motivated people can
| solve
|
| - We like to pretend it works. It does, except for 5% of a
| population and it really sucks if you aren't in the 95%. People
| in the 95% dont realize how bad it is for the 5%. By the 5% i'm
| talking about legitimately credit-worthy individuals being
| unfairly denied by the system (not un-credit-worthy
| legitimately denied.)
|
| - We like to pretend it is private market driven, but the
| private orgs driving it have almost government-level power to
| control your life by cutting off funding
| gruez wrote:
| >>This is exactly why China implemented a "social credit"
| system
|
| > The US system is also authoritarian, except
|
| >- There is almost no easy way to fix bad problems
|
| ...as opposed to the chinese system? The whole aim of the
| social system seems to be to allow punishing people for
| infractions without having to go through the messy process of
| criminal prosecution.
| ProfXponent wrote:
| The US credit system is plenty authoritarian in its own right.
| jimmaswell wrote:
| Banks, private entities, deciding who to do business with
| based on a number they calculate is absolutely not
| authoritarian. It comes nowhere close to the concept of
| authoritarianism unless you think a dress code at a club is
| also authoritarian.
| lisper wrote:
| The solution to the particular problem reported in TFA is simple
| and obvious: allow people to sue credit reporting agencies for
| damages if they report false information. You will be amazed how
| fast these things will get resolved if that reform is adopted.
|
| Of course that won't happen because regulatory capture, but let's
| not wring our hands and pretend that this is a fundamentally
| difficult problem. It's not.
| partiallypro wrote:
| You can report incorrect information to the credit rating
| agency
| TheOtherHobbes wrote:
| In the UK you can also sue for defamation, which can be worth
| substantial damages _if_ you win.
|
| Not many people realise this.
|
| Not speaking from personal experience, but I'm aware of a
| small number of cases where credit agencies, shops, and banks
| were sued for downgrading a credit score because of their own
| mistakes.
|
| I suspect this would be less likely to succeed in the US. But
| it's interesting that technically a downgraded credit score -
| especially with proof of consequent harms and expenses - is
| very close to the legal definition of defamation.
| londons_explore wrote:
| In many cases the information is _true_. Ie. you really did pay
| a $1.50 bill 17 years late because the bills were sent to your
| old address.
|
| The real fix is to only allow credit reporting systems to
| report on current debt, not any past debt or behaviour. (on top
| of the liability for mistakes you propose).
| tyingq wrote:
| There's also the issue of various creditors giving them bad
| information. I don't know how successful you might be suing a
| credit reporting agency if they were given bad info by some
| debt collector.
| londons_explore wrote:
| In the USA, in most cases, you can't in court point to
| someone supplier and say 'it was their fault, not mine'.
|
| Instead, the correct approach is to pay damages, and then, in
| a separate case, try to recover damages from that other party
| that you claim is at fault. If the other party is bankrupt or
| can't be found, you're gonna lose out.
| eberkund wrote:
| Credit reporting agencies are publishers of information.
| Publishers have editorial responsibility for the information
| they distribute, the excuse that they were given bad info by
| some random tipster doesn't hold up.
| gruez wrote:
| Do you think hacker news should be sued for inaccurate
| information posted by its users?
| ascagnel_ wrote:
| Hacker News allows basically any user with an account to
| submit posts and comments, and generally do not deal with
| data that has a material impact on others; there is no
| financial or contractual arrangement between HN and
| individual users beyond a standard ToS and moderation.
|
| Credit ratings bureaus enter into contractual agreements
| with both data suppliers and their customers and
| frequently deal with data that has a material impact on
| those who have no direct arrangement with the ratings
| bureau. I don't think it's unreasonable to expect a
| higher degree of data integrity and reliability in that
| case, and HN vs. a credit bureau is a terrible
| comparison.
| triceratops wrote:
| Hacker News is protected from this by Section 230 of the
| CDA.
|
| Credit bureaus aren't covered by the CDA since they
| aren't online or interactive information providers.
| IncRnd wrote:
| The FCRA already is a law that governs credit reporting
| agencies. Given that, are you sure they are publishers in
| the manner you imply?
| tyingq wrote:
| I'm not understanding how that works exactly, outside of
| very basic vetting that things like name, ssn, etc, match
| up. A fair amount of disputes, for example, are identity
| theft. The loan company sharing into with a credit
| reporting agency would be supplying data that looked right.
| [deleted]
| kome wrote:
| Or just regulate credit better.
| boatsie wrote:
| You absolutely can sue under the FCRA for violations, but
| there's a few major problems.
|
| First, even if you find a lawyer to take it on contingency,
| there are quite a few hard costs that are still out of pocket.
| Postage, document prep fees, travel expenses for depositions,
| expert witnesses, etc. It can literally be thousands of
| dollars.
|
| Second, if your state does not allow for punitive damages for
| this type of violation, you need to prove damages. It is hard
| to quantify what the economic damage is of a credit denial or
| difficulty finding a lender is, and thus they will tie you and
| your lawyer's time up with arguing this, even if they concede
| they erred.
|
| Third, there is a serious time commitment to make in a lawsuit.
| Interviews, timely filings, certified mailings, depositions,
| etc. Easily tens of hours possibly hundreds.
|
| Now, the type of person who can afford the time and expense of
| doing these things is generally also the type of person who can
| ignore a small hit to their credit score or a higher interest
| loan. Thus, these types of suits are not commonplace.
|
| That said, I know someone who did this and was successful in
| getting a settlement.
| FollowingTheDao wrote:
| Here is a better solution. Just do not care about your credit
| score. Seriously. It is all BS. They make you think you need
| these things, it is all marketing.
| londons_explore wrote:
| Depends if you need a mortgage or credit card to buy stuff...
|
| And remember even if you don't technically need those things,
| you might be much wealthier by the end of your life if you
| use those things, since both are effectively leveraged
| investment vehicles, allowing you to invest more and get more
| returns in good economic times.
| FollowingTheDao wrote:
| If you need credit to buy stuff your problem is not going
| to be solved by going into debt. Tell me how buying a TV on
| a credit card is a leveraged investment.
|
| You know who gets rich? People who do not spend their
| money.
|
| And don't make it sound like "investment" is always a
| positive thing. many people are still paying for their
| "investments" from 2008.
| scarface74 wrote:
| So should people just wait to buy a house until they cab
| pay cash?
| TheOtherHobbes wrote:
| Perhaps the economy should be structured in a way that
| allows people to do that without being forced into debt.
| tristor wrote:
| Perhaps it should... but it isn't. It's perfectly
| reasonable to believe that it should be this way, but
| it's irrational to behave as if it /is/ this way, when it
| isn't.
|
| The reality is that, at least in the US, it is a
| requirement for nearly everyone to have a mortgage to
| purchase a house and even for those who can afford to
| purchase without a mortgage it makes more sense to get
| one anyway since mortgage interest is usually lower than
| the rate of returns for other investments you would be
| keeping the cash in, and you get tax benefits both by not
| realizing gains to liquidate investments to buy a house
| and the interest for the mortgage is tax deductible via
| the mortgage interest credit program.
|
| Acting as if anyone is realistically out here buying
| houses in cash other than corporate investors / REITs, is
| silly. Even people on significant tech salaries are both
| better served and much more probably to have a mortgage
| even in LCOL areas.
| thrwyoilarticle wrote:
| I work for an employer who pays me in arrears. They are
| indebted to me. They could pay me up-front, but then I'd
| be indebted to them.
|
| Maybe there can be a system where dollar bills slowly
| peel out in front of me as I do my daily work?
|
| Debt exists for a reason. It's more useful than cash.
| scarface74 wrote:
| So how would you "structure the economy" to allow someone
| to buy a house without debt and that allows them to both
| save for a house and pay for some place to live while you
| are saving?
| kleinsch wrote:
| Investment or not, you're claiming people should only buy
| cars and houses for straight cash? News flash - most of
| this country isn't sitting in six figures of tech
| savings.
| FollowingTheDao wrote:
| I live on disability and bought the van I live in with
| cash so do not tell me you need credit to buy a car.
|
| Housing may be the exception, but you do not need a good
| credit score to get a loan for a house. Banks do not make
| these decisions on credit score alone.
|
| https://www.ramseysolutions.com/real-estate/no-credit-
| score-...
|
| What I am saying is that people should be spend less,
| save their money, and never going into any kind of debt,
| and ignore their credit score.
| scarface74 wrote:
| Please don't quote Ramsey. His whole mission is to funnel
| people into his high cost advisor and loan products.
|
| He also says that you should give 10% to the church while
| getting out of debt.
| FollowingTheDao wrote:
| Sorry, I don't look at people with an all or nothing
| attitude. I disagree with Ramsey on so many things,
| specifically his greed, but he's not wrong about the
| ability to buy a house without a ton of leverage.
| scarface74 wrote:
| He very much encourages buying a house with 20% down. He
| just encourages you to do it through non standard
| underwriting criteria with high interest rates where he
| gets a cut.
| scarface74 wrote:
| Unless you need silly stuff like a place to stay or car
| insurance Landlords check your credit if you rent and most
| people can't pay cash for a house.
| refurb wrote:
| Why not just sue them in small claims court for some small
| monetary damages right now? You can do that, people rarely do.
| lisper wrote:
| It's complicated. The Fair Credit Reporting Act gives
| agencies very broad latitude to blame mistakes on the parties
| that furnished the information, and the resulting legal
| situation is a mess [1]. As a practical matter, you can bring
| such a suit, but your odds of prevailing on the merits are
| indistinguishable from zero.
|
| [1] https://www.courthousenews.com/high-court-wont-review-
| immuni...
| refurb wrote:
| Understood.
|
| But just like suing a large firm, when sending a $1000/hr
| corporate lawyer to small claims court, it makes more sense
| to just settle quickly.
| lisper wrote:
| Lawyers are not usually allowed in small claims court.
| But I'm pretty sure that all of the credit reporting
| agencies have a trained staff of non-lawyers who are
| nonetheless sufficiently well versed in this particular
| aspect of the law to destroy any prospective plaintiff.
| tssva wrote:
| Small claims courts are not intended to force defendants
| to give up their right to be represented by legal
| counsel; therefore, once served defendants usually can
| file to automatically have the case moved out of small
| claims where they can be represented by legal counsel.
| londons_explore wrote:
| They're also a good way to 'bluff' by moving the case to
| an expensive court with lengthy and expensive processes,
| that you know the court costs will massively outweigh any
| potential judgement. In that case, as claimant, it's
| usually in your best interests to give up when you're
| risking millions of dollars of legal fees to probably win
| $200.
| tyingq wrote:
| Small claims court usually requires a very concrete
| definition of damages, things you can show in a receipt,
| invoice, estimate, etc.
| smitty1e wrote:
| The fact that we have zero politicians of any stripe running on
| actual reform platforms is all one need know about politics.
| SpicyLemonZest wrote:
| I'm not sure that sends any real lessons beyond the fact that
| credit scoring isn't a top political concern for many voters.
| There were bills introduced to reform the system in 2016 and
| 2021.
| smitty1e wrote:
| That Elizabeth Warren thing is the opposite of what's
| needed.
|
| Teaching budgeting in schools would be a good start.
| lelandfe wrote:
| Those most affected by incorrect credit scores will have no
| financial ability to sue a multibillion dollar credit agency.
|
| Those with the financial ability will have little incentive to
| do so.
| mywittyname wrote:
| These kind of cases can be streamlined by law firms.
|
| Not every case drags on for years. People regularly sue, for
| example, insurance companies. Both parties kind of know where
| they stand, and judges prefer that parties find a settlement
| that works.
| nevi-me wrote:
| Or simpler than law firms, an ombud process that fights for
| the consumer. We have something like this in my country,
| where we have laws against reckless lending.
|
| My mom is unemployed and medically unfit to work. She was
| given a credit card, which I found out about after a few
| years. I spent 2 years passively trying to sort the issue
| out with the bank, to no avail.
|
| I finally went to the banking ombud earlier this year, and
| the bank wrote off her debt a few days after. I could have
| gone further and tried to get her "bad credit" from the
| bank expunged (there's a complaints process), but it
| disappears after 2 years, so I just left it to be.
| Maakuth wrote:
| Isn't that what class action suits are for?
| Frost1x wrote:
| How do you class action "my specific credit report is false
| because of this specific information."
|
| There needs to be a third party regulatory agency with real
| teeth where you don't need a pile of money to refute
| claims, just a little time for the regulatory agency to
| pressure them on your behalf. The courts aren't it although
| they probably should be.
|
| The problem with our legal system is that in large part
| pointed out by GP, there's often a financial correlation in
| just how much you can utilize it which makes it ripe for
| exploitation by those with piles of capital laying around.
| dvtrn wrote:
| > There needs to be a third party regulatory agency with
| real teeth
|
| The CFPB could probably use sharper teeth
| zie wrote:
| You are right, in an individual case like that, it's hard
| to make it a class action, but I'm sure there are plenty
| of cases where they get some bad data from some vendor,
| and then promptly update 100k accounts with this bad
| data. Well that's 100k class action participants. :)
| BobbyJo wrote:
| This is simply not true. Plenty of lawyers work for a cut of
| the proceeds, and big companies don't like going to court.
|
| My sister, who works for 15$ an hour, has successfully sued
| two very large companies when they don't hold up their end of
| a contract.
|
| Even if only 'some' of the people wronged sue, it will lead
| to better practices for everyone.
| luckydata wrote:
| yeah, suing a corporation with a pro bono lawyer is a low
| friction way to deal with systemic economic injustice and
| consumer hostile business practices.
|
| In what world? c'mon.
| BobbyJo wrote:
| It's high friction, but doable. Companies generally
| settle when they know they're in the wrong (get
| everything in writing kids) thanks to a wonderful concept
| known as "juries".
|
| Juries hate when companies do wrong by the little guy,
| because they are themselves the little guy.
| orzig wrote:
| I would love to hear more of that story. I'd also assumed
| it was impossible and could definitely be convinced by
| evidence
| kube-system wrote:
| Any ad you see in the US for a lawyer is a lawyer that
| operates this way. (otherwise we wouldn't have ads on the
| side of bus stops for them)
|
| It's an arrangement called "contingency":
| https://www.legalmatch.com/law-
| library/article/contingency-l...
|
| The downside is that a lawyer is likely not going to work
| with you unless they're sure they can get some decent
| money out of the case.
| dixie_land wrote:
| Better Call Saul!
|
| it's a fictional character but that really sums up the
| type.
| jrockway wrote:
| "Works on contingency? No, money down!"
| mikestew wrote:
| The downside isn't a downside. For no charge to you, a
| professional will tell you that it's a good thing there
| are contingency lawyers because otherwise you would have
| wasted a bunch of money to find out that you don't have a
| case. And even the "wasted money" part isn't true,
| because my limited understanding and experience says that
| just about any lawyer will give you a visit for free,
| even if they intend to charge for every 1/16th of an hour
| afterward.
| BobbyJo wrote:
| She sued my grandfather's home-owners insurance for not
| paying the full price of plumbing work (they offered
| half, knowing that wasn't the contract) when some pipes
| collapsed under his house. She won, plus got extra money
| for having to wait, which allowed my grandfather to make
| some other fixes to his house.
|
| She also sued a large solar-panel installation company
| because their installed panels didn't work after several
| months of techs coming over. This was only a partial
| success as the company liquidated. They had apparently
| done the same thing to a few other people, and got sued
| into oblivion.
|
| Lawsuits are a good thing for society sometimes.
| avgcorrection wrote:
| > Of course that won't happen because regulatory capture, but
| let's not wring our hands and pretend that this is a
| fundamentally difficult problem. It's not.
|
| Regulatory capture is a huge issue, it is difficult to solve,
| it is the real mother-issue of many other issues (like this
| one, you argue), and is fundamental to modern governance.
| Credit scoring is transitively a fundamentally difficult
| problem.
| adenozine wrote:
| How can we cooperate to get rid of them?
| ProfXponent wrote:
| kome wrote:
| changing the legislation and the credit market, copying (dunno)
| the french or italian system and regulation. German system is
| pretty bad, but not as bad as in the US.
| jimmaswell wrote:
| I don't want to. Any system will have mistakes (and there are
| legal remedies for this particular system already), but for the
| vast, vast majority of people, their score is a fair reflection
| of whether you should lend to them. I've been responsible with
| credit my whole life, never had a bad mark appear on my report,
| and consequently never been denied an application.
| sokoloff wrote:
| Starve them of their income stream by committing to never take
| credit, saving and paying cash ahead of time for every
| purchase? Get everyone else to agree to do the same. Demand for
| credit scoring will plummet (and with it, the income stream to
| the scoring agencies).
|
| Open a lending institution that will lend money to anyone with
| no credit checking? Hope that you don't get adverse selected
| out of business, but if you don't and can compete without it,
| demand for credit scoring will plummet.
|
| Or petition your representatives to make this particular type
| of service illegal.
| throw8383833jj wrote:
| And, also need to get rid of all regulations that prevent
| shopkeepers from charging credit card fees (or discounts for
| cash buyers). If you're paying for everything with
| cash/debit, you're paying those credit card fees unless
| merchants can charge different prices.
| sokoloff wrote:
| In the US, cash discounts have been explicitly allowed
| since around 2010 (via the Durbin amendment to the Dodd-
| Frank law). Merchant agreements were updated to reflect
| these possibilities. (Visa's is under 1.5.4.14 Discount
| Offer - US Region and US Territories, 5.6.2.1 Convenience
| Fees - AP, CEMEA, and US Regions, 1.5.5.2 Surcharges [and
| possibly others].)
|
| Accepting, handling, counting, accounting for, and securing
| cash (against insider and outsider threats) is not without
| cost either.
| RHSeeger wrote:
| > Open a lending institution that will lend money to anyone
| with no credit checking? Hope that you don't get adverse
| selected out of business, but if you don't and can compete
| without it, demand for credit scoring will plummet.
|
| This seems unlikely to succeed. You'd wind up having to give
| the same rates to everyone, because you have no real way to
| assess risk individually. As such, you wouldn't be able to
| compete on rates for people with good credit.
| thecleaner wrote:
| I am utterly flabbergasted regarding how and why am open source
| credit rating model doesn't exist. These people rely on third
| party providers whose data is "ok" if I am being generous. They
| do ridiculous data science and its basically critical software
| engineering being done by morons behind closed doors.
| sharker8 wrote:
| Credit scores are part of the marketing scheme to make people
| think they need mortgages. Slight exaggeration but not far from
| the truth.
| partiallypro wrote:
| I don't understand your point, you can have over an 800 credit
| score without ever having a mortgage.
| alar44 wrote:
| How else do you pay for a house?
| kkielhofner wrote:
| There's yet another credit score type system that has significant
| effects on the ability to participate in the financial system
| that's much less known:
|
| https://www.investopedia.com/what-to-know-and-do-if-you-re-l...
|
| It's known (quite infamously) to essentially keep unbanked
| populations unbanked. Long story short if you've had overdraft
| fees, bounced checks, etc opening new accounts at banks that
| utilize ChexSystems becomes nearly impossible.
|
| On one hand there have clearly been people that have taken
| advantage of banks being siloed and abuse overdraft protection,
| etc to essentially get loans they can knowingly abscond with.
| Just move on to another bank. Repeat.
|
| On the other hand, ChexSystems is much less well known and a bit
| more "shadowy". The old story of "I use my debit card, mismanage
| my activity against direct deposit/balance, get hit with
| overdraft, then overdraft again once the fee hits, etc and next
| thing I know I'm $500 in the hole because of a $2.50 debit at a
| convenience store and now I'm essentially banned from every
| bank."
|
| In the case of the debit card example (or credit cards) banks
| could do what they used to and actually decline the charge.
| However they've clearly figured out it's much more profitable to
| allow the charge and just hit people with (often excessive)
| overdraft and over credit limit fees.
| Wistar wrote:
| I once had a check for about $900, drawn from a home equity
| line with tens of thousands available, rejected at a camera
| store by the Chex system which the store used at POS.
|
| There was no recourse that I could find despite spending quite
| a bit of effort trying.
|
| This was many years ago but remains a mystery as my credit was,
| and remains, great.
| ARandomerDude wrote:
| Solution: go to a local credit union (not a bank) and ask to
| speak to a manager. Explain your situation and that you want to
| fix it but can't.
|
| Many credit unions can open a no-frills checking account as
| essentially a probationary account for you that you can convert
| into whatever you want after a few months of good history.
|
| Source: I used to work at a credit union and we did this for
| people all the time.
| TameAntelope wrote:
| I just love this narrative that someone who has lived their
| whole life with a fraught relationship with banks,
| overdrafting regularly, having trouble keeping their life in
| order, etc. will suddenly have the organization and
| forethought to walk into a bank, ask to speak with a manager,
| and be able to credibly promise that they want to fix this
| relationship.
|
| I'm not saying people can't change, but it's naive as hell to
| think that they will on a dime such as you suggest.
| ARandomerDude wrote:
| It's not a narrative, it's my life experience. I saw it
| first hand, many times, which is why I commented.
|
| Sadly, there are many who will not become more responsible
| with time. But there are also many who will, and I'm glad
| to have been able to play the smallest role in helping
| people who genuinely want a fresh start.
| TameAntelope wrote:
| Sorry I didn't mean to suggest what you had said didn't
| happen, I very much believe you that people came in and
| said those words.
|
| What I have a harder time believing, and not just in this
| situation but in a lot of conversations about the
| unbanked, is that these people will, after a lifetime of
| having problems with the banking system, suddenly "see
| the light" and start behaving in ways that are compatible
| with that same banking system.
|
| This "fresh start" seems like the bad narrative, to me. I
| believe people seek it, and I believe they're hopeful
| about it, but I don't believe it's realistic to just
| assume. I definitely want to live in a world where people
| can choose to change, but suggesting that they actually
| will do that is, to me, not realistic.
|
| I feel like a more effective approach would be to change
| how the banking system works, but I imagine that comes
| with a myriad of undesirable costs.
| digisign wrote:
| This is very "fixed" mindset you're applying to others.
| Some portion of the populace grows up every year. There
| should be a path to re/build your life once that happens.
| bluefirebrand wrote:
| > I feel like a more effective approach would be to
| change how the banking system works, but I imagine that
| comes with a myriad of undesirable costs.
|
| It seems likely to me that people who can't navigate the
| current banking system at a basic level would struggle
| with any banking system you introduce.
|
| Or just any system in general.
| 7speter wrote:
| Also these institutions have protocols set up so as not to
| be able to see any "manager" at a given location. Hell in
| New York, it seems that a lot of inner city brick and
| mortar banking locations are becoming atm kiosks with maybe
| 1 or 2 employees there... not as tellers but instead to
| help with using the atms.
| gkop wrote:
| Ironically, I've seen "kiosks-only" at one bank branch in
| the Bay Area, and it was a local credit union.
| throwaheyy wrote:
| That would be because they have so many locations. You
| could walk down the street and around the corner to find
| another one.
|
| Or are you saying that a bank manager is actually hard to
| find in NYC?
| HideousKojima wrote:
| Well if they can't get their shit together long enough to
| do something like that then this credit score system for
| checking accounts sounds perfectly reasonable to me.
| TameAntelope wrote:
| I've been thinking about this a lot, and I think this is
| a good example of how we could do better as a society;
| _some_ people who can 't get checking accounts definitely
| can't handle the responsibility. Most of these people
| however, handle responsibility 10x as complex as this on
| a regular basis, and something is missing, either in a
| lack of shared cultural values (a lot of the unbanked are
| foreigners I think), or a lack of understanding of
| consequences (how many times have you heard the "I didn't
| know I'd fall down this well of overdraft fees"?).
|
| In other words, the people involved _usually_ are
| trustworthy in a generic "is it safe to bank with them",
| they're just not plugging into the system in a way that
| fits the defaults.
|
| I'd _almost_ argue that the banking system ought to be
| more flexible to maximize its compatibility with as many
| people as possible, and thus far hasn 't because of the
| drive to maximize certainty and minimize all forms of
| risk.
|
| I have no answers or real solid ideas for how to do this,
| but "it's all on them" doesn't quite feel right. These
| are (mostly) good people who will pay you back if you
| lend them money, and that should matter!
|
| I think my comment got construed as "people can't change
| so it's all their fault" and I meant it more as,
| "financial systems should be willing to move closer to
| where these people are already at, and stop demanding
| these people make all the changes."
|
| I also don't know how feasible that is, so... IDK! Just
| thinking via writing, I guess.
| jhartwig wrote:
| Thanks for being a realist! I was thinking the same thing.
| hyperdimension wrote:
| I'm apt to be that cynical as well, but if what the
| original commenter said is true, that provides me with a
| little hope.
|
| It's so easy to slip through the cracks in the system, so
| to speak. A sudden medical bill or car problems, for
| instance. I realized on my drive to work today that my
| car is the only thing keeping me from poverty. Luckily, I
| have tools in the back and would probably be able to fix
| it myself. :) Also, once you're in it, you're in it, and
| it's a strong cycle. You don't always have the luxury of
| things we often take for granted like having a nice
| outfit to wear, reliable transportation to an interview,
| and finally not even having a mailing address if you even
| end up getting a job offer.
|
| It's like the places that offer a free shower and "nice"
| outfit (for an interview) to homeless people. Sometimes
| all it takes is that little boost to get (to be sure, the
| right person with the right attitude) someone back on
| their feet.
|
| I've luckily never been in that situation, but I can
| empathize and understand how a completely ordinary person
| could quickly end up there.
| gkop wrote:
| How about a solution to the structural problem?
|
| This isn't my domain, but just spitballing, we could use
| public funds to advertise credit unions in low income
| neighborhoods. Would credit unions want this, or would it
| lead to harmful consequences? Another way of asking this is,
| how come credit unions take these customers that banks won't?
| pandemicsoul wrote:
| Postal banking would be a good solution. It would allow the
| post office to offer basic banking services for folks like
| this that can't access it at commercial institutions.
| mjevans wrote:
| You need to allow everyone to do banking via this
| resource and they should also want to use it as a bank.
| Otherwise you'll run into a situation where that bank is
| associated with risky customers and is thus treated based
| on that reputation.
| sokoloff wrote:
| Don't let the perfect be the enemy of the good/better.
|
| If USPS banking helps the unbanked by only 50 units of
| help instead of a maximum of 100, it's still a 50 point
| improvement. If Morgan Stanley or JPMorgan can offer me a
| better banking deal than the post office could, that's no
| reason to not have the post office offer banking.
|
| I agree it should be open to everyone, but don't agree
| that there can be a maximum of zero-point-zero difference
| in customer base vs other banks.
| newman8r wrote:
| > In the case of the debit card example (or credit cards) banks
| could do what they used to and actually decline the charge.
|
| I use citibank and they've recently announced that they're
| going back to the old ways of just declining the charge, and
| eliminating overdraft fees. Hopefully that's a trend that other
| banks are also following.
| nradov wrote:
| Pretty much every US bank allows account holders to disable
| overdraft protection for checks and debit cards. It's just a
| question of whether that account feature is on or off by
| default. Most banks used to turn it on by default, perhaps
| motivated by the overdraft fees. Now industry practice is
| shifting and more banks are disabling it by default.
|
| I prefer to have overdraft protection turned on. I usually
| keep very little money in my checking account and transfer
| any excess to other accounts. But a couple of times I screwed
| up the timing (my own fault). Paying my bank an overdraft fee
| was a lot better than bouncing a check.
| glenneroo wrote:
| I prefer the way banks do it here: you don't pay an overdraft
| fee, nor are you denied (unless you have a non-fixed income).
| Instead, it's treated like credit and you pay a low
| percentage at the end of the quarter/year depending on how
| long you stayed negative. I can't remember the numbers
| exactly but I've paid at most around 20 Euro after having
| gone -1000 for more than a month.
| anthonypasq wrote:
| seems like an awful lot of risk for a bank, unless they can
| see you have the money in another account you hold with
| them. Still, you're essentially treating your checking
| account as a credit card yet they are giving you almost no
| interest rate instead of the 20% seen on credit cards?
| Seems fishy
| glenneroo wrote:
| I maybe should have mentioned that we also have direct
| deposit here for pretty much everything i.e. the bank
| knows where you're employed and how much income you make
| per month. I've heard from e.g. students without
| permanent jobs that they don't usually get this perk
| (anymore). But yes, it's essentially a credit card with
| very low interest rates, although I have a credit card as
| well and the debt is automatically deducted from my bank
| account at the end of the (CC billing) month. There is
| also a section in the online banking to view CC
| transactions even though it's a separate entity from the
| bank, so any changes to e.g. region locking, limits, etc.
| must be done via the CC website.
| woobar wrote:
| This (the bank knows where you're employed and how much
| income you make) is only possible with one account per
| person, right?
|
| In the US people that do direct deposit are also treated
| differently by the banks. Both on the surface, i.e. you
| get better interest rates, and under the hood (fraud
| models adjusted).
| SilasX wrote:
| If you were going to phrase that the way most
| (inflammatory) articles talk about short term loans (like
| payday), you could instead say that you were charged 26%
| APY.
| Sohcahtoa82 wrote:
| A hybrid approach is the best way to go, IMO.
|
| Like...allow up to $500 to be overdrafted with interest
| being charged. If you reach $500 in overdraft, then decline
| any further charges.
| pirate787 wrote:
| Not spending more than you have is the best way to go.
| nradov wrote:
| Why not just use a credit card?
| tfehring wrote:
| Most US banks and credit unions offer a similar service,
| called an "overdraft line of credit." Overall I think it
| provides the best experience for the customer, but there
| are a few issues. You have to know about it and apply for
| it. You need a good enough credit score and/or regular
| income to qualify. And many of the people who currently
| lose money to overdraft fees would probably just max out
| their line of credit (commonly $1,000) and then continue to
| overdraft while also paying $80/year or whatever in
| interest.
| kkielhofner wrote:
| That's great news. We can only hope that with awareness and
| competition that once again becomes the standard!
| [deleted]
| 7speter wrote:
| > I use citibank and they've recently announced that they're
| going back to the old ways of just declining the charge, and
| eliminating overdraft fees. Hopefully that's a trend that
| other banks are also following.
|
| I have to wonder what the incentive is for them to go back to
| that instead of easy profit
| toomuchtodo wrote:
| Regulatory fear.
| partiallypro wrote:
| With Chase you can choose if you want them to do this or to
| overdraft and charge you a fee. By default overdraft protect
| is off, so charges are just rejected.
| SOLAR_FIELDS wrote:
| That's good that it's default to decline. It wasn't always
| that way. In fact, overdraft protection used to be the
| mandatory and only option.
|
| The reason that you have an option is actually not because
| of Chase's goodwill, but due to an Obama-era law that
| requires banks allow end users to turn off overdraft
| protection: https://www.cbsnews.com/news/obama-signs-
| sweeping-financial-...
|
| There are some unfortunate and annoying loopholes. In
| particular, if you have a recurring, subscription based fee
| (instead of a typical debit card transaction) they can and
| still will charge you overdraft fees for that.
| JumpCrisscross wrote:
| > _if you 've had overdraft fees, bounced checks, etc opening
| new accounts at banks that utilize ChexSystems becomes nearly
| impossible_
|
| To clarify, if you've had a checking account closed because of
| outstanding fees, and you never paid those fees, it will show
| up in ChexSystems.
|
| This deserves scrutiny, _e.g._ for bad record keeping. But at
| its core, if you 're regularly borrowing via overdrafts and
| bouncing checks, you're looking for a different banking product
| than the garden-variety checking account.
| radicaldreamer wrote:
| You're looking for a revolving credit line
| JumpCrisscross wrote:
| > _You're looking for a revolving credit line_
|
| Or an account that does not permit cheque writing and will
| bounce a transaction instead of letting it overdraft.
| nicoburns wrote:
| > Or an account that does not permit cheque writing and
| will bounce a transaction instead of letting it overdraft
|
| Seems like the problem might be that this system will
| also prevent people who have a bad reputation in it from
| getting one of these accounts?
| JumpCrisscross wrote:
| > _this system will also prevent people who have a bad
| reputation in it from getting one of these accounts?_
|
| Could. In practice, plenty of banks fill this niche [1].
|
| [1] https://letmebank.com/banks-that-dont-use-
| chexsystems/
| nullfield wrote:
| This is the requirement now-affirmative consent/opt-in:
|
| https://www.nafcu.org/compliance-blog/overdraft-
| protection-m...
|
| If they make it really easy for you to opt in/a quick
| checkbox then they can make money. That said if someone
| is living so tight and wants a transaction declined if
| their account doesn't have the funds, the financial
| should make that easy and obvious to do. Behaving
| otherwise is predatory.
| ensignavenger wrote:
| There are lots of banks now that don't use ChexSystems now,some
| bank tech companies that you can get accounts with your mobile
| phone, so that helps for some of the populations.
|
| As far as the debit card issue goes- if you are bad at managing
| your accounts- you should always opt out of overdraft ability,
| an option that consumers have legally had for several years. If
| you opt out of electronic overdrafts, your bank cannot legally
| charge any overdraft fees for those transactions (they will
| probably decline the transaction... but if they do allow it,
| you can't be charged a fee if you have opted out). see
| https://www.consumerfinance.gov/about-us/blog/understanding-...
| formerkrogemp wrote:
| Oh it's a little more pernicious than that. ChexSystems and a
| few other companies are used to check a database when cashing a
| check at major retailers in the US. Walmart and Kroger utilize
| this third-party vendor to deny check cashing (including
| payroll checks) to people who're on the same list as those who
| can't open bank accounts. Good luck getting that check cashed
| for less than $20-30.
|
| Source: I used to work in retail.
| nradov wrote:
| That's why many larger employers (including Walmart) now
| offer unbanked employees the option of getting paid with a
| pre-paid card instead of a paper check.
| kkielhofner wrote:
| Wow, I wasn't aware of this use of ChexSystems but from the
| standpoint of banks, check cashers, etc that makes business
| sense.
|
| From the perspective of people trapped in this system paying
| 10% in fees to cash a $300 check is outrageous - but at this
| point it's more or less what they have to do and that's "just
| the way things are".
| ge96 wrote:
| That was an awkward experience, I tried to open a bank in
| person and was blocked because of Chex. It is my fault though,
| but for example I opened a Citi checking account and never used
| it but somehow it had some minimum balance or something,
| started charging me... I had to pay like $38 or something to
| close it.
|
| I had the overdraft fees problem with BofA too and recently
| some suit was settled/I got a $20 check.
|
| JDBs suck but I did turn my stuff around eventually eg. 300s to
| 750s.
| bob1029 wrote:
| I have personally implemented this product for several
| financial institutions.
|
| In my experience, many are simply doing it as a form of KYC
| (i.e. customer authentication) than an actual "is this a bad
| customer" check.
|
| I have seen some really janky shit too. Every FI I have ever
| worked with ultimately decided to implement some "exception"
| process to be able to work with customers when there is some
| system outage or other unexpected results come back.
|
| Additionally, every institution I worked with also provides
| some form of second-chance product offerings to customers who
| come back with a red-hot report. Obviously, these products do
| not offer overdraft or other line-of-credit features, but they
| are real checking accounts for all other purposes.
|
| From my perspective, it's not an ideal system. But then again,
| I don't know that ideal is possible or desired. I think if Chex
| didn't exist, something else certainly would take its place.
| I've watched some other vendors exit the space recently, so I
| think they are now the last/biggest player.
| verisimi wrote:
| You sound like you're not sure that what you implemented was
| good for anyone.
| bob1029 wrote:
| If you are implying there is some sort of ethical harm in
| undertaking this kind of work, I can assure you the thought
| was crossing my mind the entire time. My choices were
| ultimately:
|
| 1. Implement this product as specified, doing everything in
| my power to ensure rules are being followed throughout.
|
| 2. Quit my job in protest, bringing down my tiny startup
| company. 10 people are immediately out of work. Our client
| finds someone else to implement chex for them anyways.
| verisimi wrote:
| I do consider the ethical implications, of which there
| are many.
|
| I think we are coding ourselves into dystopia - where
| technology will not be serving us, but we will be serving
| it. We might be there already.
|
| Which 'governance structure'/'rule creating structure' is
| going to ensure that the moral elements are considered?
| Or do they simple wave through the legislation big
| corporations' lobbyists have written? Will big
| corporations' so-called the 'ethics committees' give us
| the moral outlook we need? (I don't think so - they are
| about justifying the unjustifiable, it seems to me.) What
| is better - that 10 people you are out of work, or that -
| as you say - someone else will implement this?
|
| These questions are very hard to answer. There are lots
| of coders who will do whatever-it-is without hesitation.
|
| Ultimately, I guess we will have to do as we each see
| fit. What I say: morality is a question for the
| individual, so how do you judge yourself? That is one way
| to guide oneself through the mire.
| metacritic12 wrote:
| I wonder if this is statistical discrimination.
|
| Like in theory, someone who closes an account $2.50 in the
| negative does very little damage to the bank directly. The
| $2.50 is a small fraction of the annual overhead of the bank
| account.
|
| Yet these behaviors are highly correlative of unprofitable
| checking customers. The entire checking account model seems to
| be based on whales that return the bulk of the profits. If you
| sneeze wrong, your statistically 10x less likely to ever become
| that whale.
|
| From a profit maximizing POV, it totally makes sense for banks
| to do this. But from a "banks are a basic utility" point of
| view, it doesn't seem to make sense.
| gscott wrote:
| Bounce fees are highly profitable. Large banks earn over a
| billion dollars in bounce fees yearly each.
| metacritic12 wrote:
| This is true, but bounce fees are a minority of bank
| revenue.
|
| I just pulled the BofA 2021 10K [1] and it shows $3.5bln in
| service charges, but $24bln in interest income.
|
| [1] https://imgur.com/a/cGjM5Gi
| throway782 wrote:
| Why must profitability to a banker matter to public
| optimization of agency? If anything the banker just becomes a
| thought policing grifter who empowers agency of some without
| any oversight.
|
| A banker is nothing more than a fallible human. Why record in
| my inner monologue they're to be seen as more than that?
|
| Prior to open discourse online, public relations teams did a
| stellar job convincing people financiers are special. I've
| been in the room with people that attend Davos. They mock and
| ridicule the public as they decide who is worth what to their
| bottom line. They're uniqueness is a hallucination.
|
| Contemporary society is leveraging well understood propaganda
| techniques to take advantage of the same biological quirk
| religion stumbled upon by accident.
|
| One person is one person. Not some figurative thought leader
| we must kowtow to.
| Retric wrote:
| Many banks actually make most of their profits from fees not
| whales. A X$ overdraft fee quickly enters payday loan
| territory in terms of profit vs capital at risk.
| dalyons wrote:
| Exactly. Most banks lose money on servicing a standard
| checking account with debit card for people with no cash
| flow issues. They make it back in fees(mostly overdraft)
| off those who struggle - it's a direct subsidy of the
| better off by preying on the poor.
|
| Disclaimer: I work for a neobank (chime) which inverts this
| model and has none of these fees and does free overdraft
| nullfield wrote:
| Then you're just making all your money on interchange,
| right?
| ntoskrnl wrote:
| It seems like customers who get rejected by ChexSystems
| would be more likely to overdraft frequently and be
| profitable to the bank. Why are banks using the system to
| deny them accounts?
| FireBeyond wrote:
| I ran into this many years ago with the transaction
| reordering scandal, when KeyBank turned a series of
| transactions on a given day (that were all cleared funds,
| to be clear) that should never have overdrawn me, and
| left with me with roughly $100 in the bank, instead ended
| up with me being $400 overdrawn, thanks to an absolute
| slew of overdraft fees, that the bank (and I) refused to
| budge on.
|
| My ChexSystems entry wasn't removed until there was a
| lawsuit against the bank.
| clairity wrote:
| > "Most banks lose money on servicing a standard checking
| account with debit card for people with no cash flow
| issues."
|
| that's simply not true. the marginal cost of a checking
| account is on the order of a dollar. the breakeven on
| that is on the order of holding (and otherwise using) a
| deposit of a $100 for a month or two. banks are not
| losing money on the balance of their checking deposits in
| any conceivable way.
|
| that's a just-so story told and retold uncritically to
| convince the gullible that fees are "necessary". they're
| not. they're pure profit, and borne of pure greed. no
| bank requires fees to function profitably.
| xeromal wrote:
| It seems like there could be two kinds of customers at a
| bank. One who doesn't get to operate on credit or overdraft
| protections, but still can us the bank as a means to keep
| their money safe while allowing customers who can be trusted
| to still use those extra resources.
|
| Seems like a win win for everyone. Banks should probably be
| required to allow at least a minimal bank account even to
| people who aren't the best with their money.
| dalyons wrote:
| Win win for everyone except the banks, they make huge
| amounts of money off punitive overdraft and are not
| interested in letting that go. $12.4 billion in overdraft
| fees in 2020
| samstave wrote:
| A credit union I used to belong, had a piece of paper
| hanging on the wall right next to the tellers, it had
| their running income monthly from overdraft fees.
|
| Before the 2008 real estate collapse, this number was
| less than $100,000 per month.
|
| During the recession, I noted it was going as high as
| $600,000 per month. At one location in Sunnyvale Ca.
| sjostrom7 wrote:
| I don't doubt you, since you saw this first-hand and
| didn't hear it from your friend's cousin's dog. But what
| purpose could a sign like that serve for tellers?
| xeromal wrote:
| I could be outdated, but weren't overdraft feels turned
| off by default during the Obama era? You have to go out
| of your way to turn them on now.
| gruez wrote:
| >However they've clearly figured out it's much more profitable
| to allow the charge and just hit people with (often excessive)
| overdraft and over credit limit fees.
|
| Wait, so which one is it? Do banks want to exclude people with
| overdrafts because they're bad customers (for whatever reason)
| or do they want those people because they can rake in the
| overdraft fees?
| IncRnd wrote:
| They probably want those people as customers in order to
| garner fee payments, but they won't extend credit to those
| people. Those are two different activities.
| gruez wrote:
| except, the parent post claims the system to "essentially
| keep unbanked populations unbanked" and "opening new
| accounts at banks that utilize ChexSystems becomes nearly
| impossible". Presumably if you want these people to be your
| customers and rack up fees, you'd want them to at least
| hold an account?
| kkielhofner wrote:
| Why can't it be both?
|
| With the proliferation of "free checking" without so much as
| a minimum balance in most cases banks have essentially
| created a selection system to continually marginalize
| customers that aren't profitable while selecting for
| customers that are.
|
| From the standpoint of a business (which banks are) this is
| understandable. However as has been noted in other comments
| banks also serve a utility function and for the the type of
| customer that routinely doesn't have $2.50 in their checking
| account to trigger that overdraft in the first place several
| hundred dollars in fees might as well be a million. Of course
| they take off and the account gets closed. Now, because of a
| $2.50 loss to a bank, they're essentially excluded from the
| most basic functions of the financial system while people
| like us continue to benefit from free products, preferred
| interest rates, credit card points, etc.
|
| Simultaneously, if due to some perfect storm of events (cash
| flow, mistakes, etc) if customers more similar to us somehow
| end up in this situation we'll pay the fees. The bank has a
| "valid" reason to boot the poor, they make a ton from the
| middle-ish class, and they stay in good favor with those of
| us that are more wealthy. They can't lose.
|
| The extremely simple (but overall less profitable solution)
| is to just decline the charge.
|
| My preferred status at banks is being subsidized by the poor
| and that doesn't sit right with me. I've tried credit unions
| but they're almost completely unable to meet my needs.
| ac29 wrote:
| > In the case of the debit card example (or credit cards) banks
| could do what they used to and actually decline the charge.
| However they've clearly figured out it's much more profitable
| to allow the charge and just hit people with (often excessive)
| overdraft and over credit limit fees.
|
| It should be noted that overdraft services have been opt-in
| only since 2010:
|
| https://www.consumerfinance.gov/rules-policy/regulations/100...
| sokoloff wrote:
| My bank (USAA) allows me to configure it to automatically take
| a credit card cash advance (rounded up to the nearest $100
| increment), which is my preference for the every-other-decade
| situation where I would otherwise have an overdraft.
| [deleted]
| EVa5I7bHFq9mnYK wrote:
| I think in the US credit score system rose as a way to work
| around racial discrimination laws.
| jimmydeans wrote:
| bsenftner wrote:
| Credit scores can only affect your life if you live on credit. I
| spent 20 years without a credit card, and the only impact was
| being a hassle to rent a car. but as far as cars go, I do the
| unthinkable: I save and buy with cash. I simply do not use
| credit. Beyond my house payment, I purchase everything up front,
| including the nice and hefty discount when paying insurance in
| full for the year. It is a pain in the ass to get used to not
| using credit, but it is so, so worth it.
| andrewmcwatters wrote:
| I have also had this experience. Renting a car is very strange
| in that regard, but other car rental businesses are happy to
| take my business with a refundable security deposit, so not my
| problem.
|
| In fact, I find it strange and shortsided, because the people
| without credit are generally going to be the people who have
| less of a hard time fulfilling their payment obligations.
|
| Other than that, it has never affected my life. You can get a
| manually underwritten mortgage still today.
|
| There is always someone else who wants your money more.
| adrr wrote:
| How did you get home loan if you didn't have any debt to build
| up your score and credit history?
| bsenftner wrote:
| It's called putting down $150K in cash, and having a stable
| job. Also, my credit "score" is "N/A".
| adrr wrote:
| Putting $150k down is like standard since you need to put
| down 20% anyway. Are you paying like significantly higher
| interest rate like a jumbo loan? If you don't have a credit
| score, the government won't back it so its more risk on the
| bank and you're paying a much higher interest rate. Banks
| also don't keep the loans and package them up and sell
| them. If you don't have a credit score, not sure how they
| would do that. No score would qualify as subprime.
| bsenftner wrote:
| Most people's 20% down is also a loan. Plus, in addition
| to that $150K down payment, I can point to my savings
| account with more than the loan debt inside. The only
| reason I have a loan is for the tax relief, if not for
| that I'd have purchased the home completely. My home loan
| is under 2%.
| ryathal wrote:
| That's a stupid reason to have a loan, unless you really
| like paying banks more than the government. It's still a
| loss to you with the tax deduction.
| avgcorrection wrote:
| Certified stud.
| AnIdiotOnTheNet wrote:
| It was easy in my case. As I recall, all my bank wanted to do
| was 3-way call a few bill collectors so I could authorize
| them to talk about my payment history.
| throw8383833jj wrote:
| this seems like the logical conclusion to me. I was scanning
| the comments for something like this and surprised that others
| didn't come to this conclusion.
| technothrasher wrote:
| > It is a pain in the ass to get used to not using credit, but
| it is so, so worth it.
|
| Using credit to buy things you can't afford is a bad idea, but
| using credit to better leverage your money is very useful.
| Especially with increasing inflation, having debt that you have
| no trouble servicing isn't a bad thing.
| digianarchist wrote:
| I've leveraged credit quite a lot in my life and paid very
| little in the way of interest. That leverage has netted me
| quite a lot of money be it actual return on investment or being
| able to position myself to earn more, by moving countries.
| nisegami wrote:
| This is simply not true. Your credit score is frequently taken
| into consideration applying to rent a place to live.
| AnIdiotOnTheNet wrote:
| I rented my first two apartments with no credit history
| whatsoever before buying a house (and acquiring a mortgage)
| with no credit history at all.
| bsenftner wrote:
| How's about staying in the same rent controlled apartment
| for 32 years, so I can save? That was amazing, as I was
| still paying $950 when my neighbors were paying $2200 for a
| smaller place.
| AnIdiotOnTheNet wrote:
| People always told me growing up that I should get a credit card,
| to start building credit for when I eventually wanted to buy a
| house. I didn't bother, because buying things on credit always
| seemed sill to me. Come time to buy a house and those people were
| still all "oh boy, you're going to have a hard time!", but you
| know what? Having no credit history wasn't a problem _at all_. I
| had to arrange for bank representatives to talk to some bill
| collectors and authorize them to talk about my payment history,
| that 's it. Sure, maybe I didn't get the best rate in the world,
| but it was a pretty fair one. I feel like stories like this are
| intentionally played up for the benefit of the credit industry.
| ProfXponent wrote:
| I locked my credit when I left the US, and I have no intention of
| ever unlocking it.
|
| Free yourself from a broken system and experience the world that
| doesn't treat you like a wage slave.
| martin_bech wrote:
| As a European, the credit score system seems completely bonkers..
| 0daystock wrote:
| Credit Scores are bad, but "The Work Number" and other creepy
| derivative products are getting so much worse. There is a literal
| ledger of our salaries being shared by companies to presumably
| coordinate wages - how is this ok?
| banannaise wrote:
| And then we have "tenant screening services" which give major
| negative marks for things like being taken to court for
| eviction, even if it was years ago and _even if the judgment
| was in your favor_.
|
| These are, of course, not covered by the Fair Credit Reporting
| Act, so nobody is required to tell you what's on your report or
| allow you to dispute it, nor do they even have to tell you they
| used the report in denying you an apartment.
| tediousdemise wrote:
| It's okay because we're just servants tied to our bank
| mortgages with little to no say in what the elite shareholder-
| run private sector dictates behind closed doors (and in which
| the legislative elites are also privvy/permissive).
|
| Year over year, your freedoms and finances will slowly dwindle.
| A law is passed that destroys your privacy...
| local/state/federal taxes are increased... the cost of
| groceries and housing keeps creeping up... but your employer
| need not cut you any slack, because you're just a number in one
| of their spreadsheets, serving a means to an end.
|
| There are no laws that dictate companies must pay a livable
| wage; instead we are brutalized and battered by the free
| market, with nothing left but a steadily decreasing quality of
| life.
| stuu99 wrote:
| caethan wrote:
| Relevant article from patio11 on how to fix this problem if you
| have it: https://www.kalzumeus.com/2017/09/09/identity-theft-
| credit-r...
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