And who runs these monitoring services? Why of course, it's the credit reporting companies! Who else would it be. So not only do they know when fraud is happening to you, but they will happily ruin your life while knowing and charge you for the privilege of knowing this is happening to you. And maybe, if you're lucky and the tiny font legalese text is in your favor, you can stop the flow of awful things happening to you at any given moment in time. Events which may just have all been started because Equifax didn't give a damn in the first place about the security of your private information.
Everyone seems to like the idea of friendly local stores these days, but I also remember reading an interview with someone who was around when large chain supermarkets were starting. They loved the fact that they were relatively anonymous so people weren't able to gossip about you buying, for example, condoms.
There's clearly a balance to be struck here, and it's well away from a sensible middle ground at the moment.
Worst case, I move the cash to a 2% interest rate bank account and let it sit there. Best case, there are other investments I can make now with that capital, and end up paying less overall for whatever I was buying because having the money has made me money in some other way. Lucky case, the company bankrupts and I don't end up having to completely pay for the thing at all.
Being also European, it is rare to be offered interest-free financing, and when you are, is because you are already paying a premium and could find the stuff cheaper somewhere else. But occasionally, some shops do have the cheapest price and still offer interest-free rates. I always take it, and have no idea why I wouldn't do that.
Disagree. This severely complicates my economy.
Instead just having X funds less available, I still have the same funds at disposal, but have to remember I owe X to Y which must be paid by Z.
Even just once this makes the simple question “How much disposable funds do I have?” hard to answer.
More than once and I will need a system to manage my own personal economy. That’s horrible!
When asked for credit I always answer no, because the small savings of delayed payment does in no way make up for the extreme complexity it adds to day-to-day economics.
Play with the transfer amounts to suit your budget. This helps you not have to think about spending money, or if you have enough to pay rent that month.
Back to the furniture example from grandparent comment, I simply ensure that main has enough in it each month to cover the monthly expenses. HTH
Some online banks have virtual subaccounts, which let you 'hide' money from your main account, if that's the way you are tracking funds available.
> More than once and I will need a system to manage my own personal economy. That’s horrible!
You already have a system, and it sounds like it's 'ask the bank how much money I have'. In the not too distant past, checking accounts came with a checkbook that included a register for you to track your expenses, but I guess humanity has declined.
In fact, if you aren't buying on credit your finances are more complicated because you have to plan ahead make sure you've got future major expenses covered.
I'm fascinated by this. Where do you find these sky-high interest rates in banks?
Make sure you go past the "featured" ones :-)
Ally Bank, wealthfront etc.
The key is to make sure they're FDIC insured.
And it's perfectly okay for example if you just bought a new flat and you're broke as fuck, because you spent all your cash on must-repair stuff, like getting the plumbing in order, but you also fancy a new bed, because you have none, so interest free bed it is!
Of course if you barely make enough to live month-to-month, then it's unlikely you'll be able to pay the monthly installments of the loan. (And usually you'll be declined even the in store zero-interest loan too.)
Furthermore the shop pays some service fee to the loan provider, and thus they scrape by.
People in low income communities find it very normal to buy on credit, often allowing you to buy now, pay in a year. My friends from higher income communities think this is a strange thing to do.
What I'm trying to say is that some of these customs might not depend on country, but even on groups within countries.
On a related note, I've personally noticed that here in the Netherlands, there's a pretty clear split between low income and high income, very tightly connected with education. In 'High School', lower and higher education are split in different classes and often different schools. So friendships are often formed within these groups and not across them (sports begin the exception). Because of this, a lot of people think something is normal in the Netherlands, but it's actually normal in their environment.
Payday lenders don’t have limits on the amount of interest that they can charge for a given payday loan. Worse yet, loan applicants don’t have to demonstrate ability to pay the loan during the application process.
Legislation was recently passed to require payday lenders to loan only to those who could demonstrate ability to pay, but this was recently reversed after intense lobbying by the payday lenders.
Credit access is vastly predatory in the US, and feeds into our consumerist culture that believes in nice phones, watches, cars, whatever, and has created generations of debt slaves owing interest in excess of 20-30% that they’ll likely never be able to repay.
A former coworker once said to me: “those who understand compound interest earn it, and those who don’t understand compound interest pay it.” And generally, I’ve found this to be very true.
Sometimes cash flow is more important than final price. I haven't experienced it myself, but I heard that this is especially true for low income people who live paycheck to paycheck. The $300 couch you can get on a credit for 24 easy payments of 30 dollars is easier to afford than the $100 used couch.
I do agree with you, since I've done it myself. I've also taken furniture friends were going to trash. But I refinished and cleaned them. However I know not everyone has those skill sets.
But, is it right to say someone can't have something moderately nice? I couldn't afford to in the past and lived like that. I didn't like it, obviously. But I also had an "exit strategy" to that situation, which has decently worked out.
I'm just curious how I'd feel if it didn't work out. Even though I agree with you, that comment kind of stung oddly... I don't know...
If they can't reasonably pay for it, I don't see what other option there is for a responsible adult. Perhaps that is my cultural background speaking.
Furniture is high margin, low volume so furniture retailers have an incentive to spread out cash-flow and get consumers to buy more expensive furniture than they would if paying all at once.
That said, I suspect if your rand the numbers you'd find that the overwhelming majority of furniture (by units sold) is bought cash from Walmart, Ikea and the like by people paying cash.
But it's also pretty common for cars and houses and the like.
Ikea, and nearly any reasonably sized furniture store, has a financing arm. So I assume it's common (and a money maker).
Thing is, often these places offer 6 months interest free and what not, so as long as you pay off your debt in the allotted time, it's smarter than paying cash.
The discount is small, I agree. But it's always worth it. It's riskless if you have the cash anyway.
And regarding having cash: if you set aside the full amount in cash at time of purchase in order to reduce the risk of not being able to pay the rates, then you did win absolutely nothing. Opportunity cost of not having that cash available for profitable investments in case of paying in cash is what could possibly be the reason for the credit variant being cheaper in the end, but that of course depends on you investing the cash and divesting just when it is necessary to pay a rate.
Then I got smashed with a HUGE interest charge, they charge you ALL of the interest from the 18/24 months at the end of that time if you have a blance
I buy $300 couches from the clearance center now, in cash.
Typically it works like this: people simply try not to spend their whole income, and save at least some part of it. Then, when they arrive at a significant amount of it they sit down and think: what can we do with those money? buy a new car? redecorate our living room? And if they decide to redecorate they buy furniture or whatever is needed with cash. Buying stuff on credit is pretty much unheard of.
I might add it's one thing to buy a car or house on credit, another, very different is to gouge on credit cards and have them topped up beyond your repayment capacity.
The best of them (Experian) can see that I have a credit card and I pay it off every month. They can see I don't have any unsecured loans from major banks, and that I'm registered to vote (information available for personal inspection to anybody but supplied in bulk only to CRAs)
None of them has any idea that I own property, or that I have a large amount of savings, or that my salary is many times more than my expenditures. That's invisible. I could prove it if I needed to do so for some reason, but it isn't passively collected (in the UK at least).
I find them to be highly unethical and to generally result in a contract negotiated without compensation and any communication in good faith.
No, this is only true because the law does not meaningfully restrict abusive contracts. Sure, a credit card issuer should  be able to ask some agency for information on your credit risk. It does not follow at all that the issuer should have permission to give information back to the agency.
 Even this is debatable. One might reasonably argue that the use of inscrutable conditions for the issuance of credit cards is discriminatory and should, as a matter of public policy, be disallowed. As a simple example of how this could work, all credit card issuers could be required to instead issue prepaid cards with identical terms, benefits, and usage from a merchant’s perspective, and credit could be an opt-in extra feature.
What's more bothersome to me is that these companies are scooping up every bit of information they can about me and selling it to anyone. Did I consent to TheWorkNumber? I definitely did not with the first few employers / payroll processors who have sold out my payroll data.
I Google my full name and the first hit is some background check site that shows my birthday, most of addresses I've had since the mid-90s, every family member I've shared an address with since 1999, information on two vehicles I presently own and one former, and that's just the bait to get someone to pay for whatever else they know about me...
'Credit' information is the tip of the iceberg.
Your existence in the world isn't a secret. Every scrap of that is public information. You have a postal address to get mail, you register your car with your state to pay taxes on it, etc.
1. Any of those scraps of data have negligible value by themselves, but when they're aggregated and traded their value is vastly increased.
2. I don't have any choice in how those scraps of data were originally gathered and shared. Should I not to have an address? Pay my taxes? Register my vehicles?
2. So? Why should you have a choice in it? Those things are classified as public records, available to anyone.
Maaaaaybe birth certificates should be public, but why should who owns what car be public? Or who lives at what address?
There’s no opt-in required because you’re not the one providing anything. The customer of the credit agency, the company extending you credit, is opting in to share what they know about you.
> There’s no opt-in required because you’re not the one providing anything. The customer of the credit agency, the company extending you credit, is opting in to share what they know about you.
Until you get too large, powerful, and rich, then the government regulates you. This is the purpose of regulation, to control the abusive use of power.
The agreements you sign when requesting and getting credit explicitly grant that right.
"Credit Reports: You agree that we have a right to obtain a credit report in connection with our review of your application and after we establish an account, to administer the account. You agree that we may report to others our credit experience with you. At your request we will provide the name and address of each consumer-reporting agency from which we obtained a report about you."
Was it plastered across the very top of the form in bold type? No. Was it "buried in pages of small print legalese"? No.
So they can weed applicants out. This is very common in the fire service. Applications can be 40 pages long and they want you to list each financial account, balances, limits, etc. It's ridiculous. But I know just why they're doing it. I also think such requirements are weeding out minority applicants.
at least most agencies have stopped asking you to write down all of your social media accounts & passwords. or requiring you to add HR managers/etc as friends.
A loan is shared risk. If it wasn’t there should be no interest payments above inflation and labor.
Where is the line for invasiveness? I mean, if I knew a couple was having issues and they were in counseling, but they didn’t start until eight years in, that’s a bad sign and any therapist will probably tell you so. If a bank is allowed to know everything about you they will say no to a loan, probably killing the relationship once and for all. Similarly if they know he has a doctor appointment to look at the lump on his testicle. Predicting people’s lives are about to get very difficult and then forcing it to happen by rejecting or calling a loan is movie villain cruel.
If I were their friend and knew about the marital strife, and they wanted to borrow money from me to do something expensive, my reaction would be no. It was always going to be no because I don’t loan money to friends unless I don’t want that friend. But what I’m going to say is, “besides, those two aren’t gonna be together in three years so how would I get my money back?”
You want banks in your bedroom? Because by their logic this is useful information and if it’s available it would increase their profit margins...
Just because you can do something doesn’t mean you should.
Credit used to be much, much harder to get, and more expensive. You got loans from friends. You shopped at a particular store for years and built up your reputation before they would offer you credit. You pawned something. Or you just saved your money and paid cash.
Completely untrue. But if you want good loan terms, yes you will need to participate in the system of sharing credit terms, because reputable banks don't want to deal with bad debt.
Yes because it is. No because you want something that someone else has (£€¥$) and that someone needs some kind of assurance that they could ever get their money back.
Are you saying these two ideas are related? If so, I don't quite see the connection -- can you expand a bit?
In none of these cases did I opt in. And I decidedly couldn't opt-out.
Of course that could be grounds for a litigation, but at that point the data is already gone and, other than being a PITA, suing wouldn't really be worthwhile as that hardly counts as damages.
That's not an unfair request on their part.
Don't want to participate? Then don't ask for a loan.
That's not really what they care about. They don't even get to choose whether you previously borrowed money only from people who agreed not to report anything to Equifax et al.
What they really want is to be able to inform on you to their competitors as leverage in getting you to do what they want, like pay false charges instead of disputing them because then you refusing to pay them allows them to ding your credit score. Which in turn raises the interest rates on all your existing variable rate debt and can put your whole life into a downward spiral.
Whereas without it, lenders would be more wary to lend money, but that would be true universally. So the result would be that things like housing and education would be more affordable because it wouldn't be so easy for everyone to borrow money and bid up the prices, and people wouldn't be paying such a high percentage of their salary for loan interest.
Which leads to the conclusion that the whole system is corrosive and we would be better off without it.
> Don't want to participate? Then don't ask for a loan.
It's a collective action problem. Everyone is better off if nobody takes a loan to buy a house and then the same people get the same houses but everybody pays less, but if you refuse the loan and the competing buyer doesn't, who gets the house?
I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely.
The existing land owners are probably the biggest real opposition now, though they wouldn't be any worse off if we had done the right thing to begin with, because then they'd have paid less from the start too. It could be worth a one-time cost of paying them off in some way.
It's debatable whether the home builders would actually be worse off, because most of what people are really bidding up is the land, since construction has a lot more supply elasticity than land. They may even get more work in the long term as people aren't paying loan interest as much, so they ultimately end up with more money that can be used for home improvement projects.
And I don't think people have a lot of sympathy for the plight of the mortgage lenders.
> I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely.
Why would it do that? There would still be the same amount of land, so approximately the same people would have it. If it costs less by the same amount as the credit which is no longer available, the main difference is the interest you're no longer paying to the bank. If anything that should benefit people at the bottom of the ladder, who would have had to take loans with higher than average interest rates.
One of the most consistent and reliable means to lift oneself from the low end of middle class to squarely middle class has been the leveraged purchasing of property in a city that continues to grow. Taking a 3% or 5% downpayment and having housing appreciate at inflation or slightly higher than inflation is a tremendous wealth creator when that equity is created with leverage.
Homes appreciating faster than inflation is also an unsustainable trend in general. The result has been for housing costs in those areas to increase as a percent of wages, which obviously can't continue indefinitely because the result would be housing costs that don't leave enough for other necessities like food, or that exceed wages outright.
It's true prices probably wouldn't fall to only 3% of what they are now and so the same people couldn't purchase the same house immediately, but rents would fall along with housing costs. The combination of lower housing costs and less paid in interest on huge high-risk loans would allow the same people to own the same house outright in less time, even if it meant renting it for some period of time first. And of course the money they intend to use to buy the house could in the be earning interest before they reach the threshold to buy the house without a loan, which (if the efficient market hypothesis is correct) would give the same risk-adjusted returns in the meantime as investing the same amount in home ownership.
On a conventional mortgage with 20% down, if the house appreciates at 1% per year in a 2% per year inflation environment, a $100K house goes up by $1K each year. Someone who bought that house with $20K down sees a $1K gain on their $20K cash investment, for a 5% cash on cash return. They also have a place to live typically substantially cheaper than they were paying in rent. Obviously, where they increase even faster than inflation, this is wildly beneficial and if they decline much at all, it's terrible.
3% down mortgages seem to cost around 1.25% more than 20% down mortgages. It's about 1/8-1/4% on the base interest rate and 0.5%-1% for PMI. With a base interest rate on a 30-fixed around 4%, paying 5.25% on a 3% down mortgage is still a good deal IMO.
If landlords had to pay cash for rental properties, I'm not convinced that you'd see such a surplus of rental properties such that it would drive rents down significantly. Rents are driven by ability and willingness to pay. Many small landlords would be forced out of the supplying housing to others work. If landlords could borrow money to buy houses but owner occupants couldn't, I think you'd see a massive defection of the housing economy in favor of landlords.
Obviously, anyone could borrow on unsecured terms. It seems likely that medium and large landlords could exploit that (borrowing against the projected cash flows, but without using real estate as collateral for the loans) and that would also result in a large shift of power away from owner-occupants and small landlords.
This is not pragmatic advice. I needed to take out loans to go to college. My phone company did a credit check before they'd let me sign up for a plan. So did my landlord before they offered me a lease. When I buy a car or apply for a mortgage on a house, they'll also check my credit.
This system is deeply ingrained in our society; there's not really a way to opt out and still have a relatively normal life.
And this is what needs to change. I’ve known many successful people that moved to the US and then had problems getting services because they had no “credit history”.
Translation: Don't participate in the economy unless you're independently wealthy.
Conveniently left out: Don't ever apply to rent a house or an apartment. Instead, buy a home. In cash, of course, because you're independently wealthy.
Oh, and also: Don't apply for a job. Because, you know, independently wealthy and all that.
The idea that non-participation in the credit racket is anything but an exercise in extreme economic privilege is laughable.
My parents managed to obtain a loan for their first apartment thanks to my grandparents offering their house as colllateral. This is how pretty much everyone from my parents' generation got their first apartment.
Credit pretty much didn't exist in my parents' generation - loans were generally reserved for houses and cars, because of the strict conditions. Everyone saved up lump sums and paid cash. It's ineffficient, but far from "not participating in the economy".
It may be possible to negotiate different conditions on receiving credit, but I don't know if you can demand a modern economy without any drawbacks.
It's possible to get credit without someone else but you'll get an absolutely terrible interest rate -- if you have someone in your life with good credit that trusts you (like family) you're leaving money on the table by not 'borrowing' their good credit.
I have personally walked away from work agreements for jobs when they wouldn't remove non-compete clauses, but not everyone has that option.
There is no "meeting of the minds" here in any real sense.
Just because you don't have options to cut essential parts of the contract out doesn't mean there is no "meeting of the minds."
The Bible tells us that Jesus drove the money-lenders out of the temple. Which means that loans predate credit reference agencies by thousands of years. Therefore we have historical record that they are superfluous.
You have agree to pay interest, on time and pay the loan back. -- ok that's not something you can reasonably opt out of and hope to get a loan.
You have to agree to to have your life ruined on a whim or by incompetence because you borrowed $1k and paid it back in full with the interest? -- no, definitely not ok.
In between the extremes are all the cases that need looking at. This is a standard case of market failure where you as a consumer have zero market power to effect your preference and your preference is more than reasonable. The GFC was one occasion where such a market failure really came home to roost. There are others, some are trivial, some are huge, most in between. Where it can ruin your life, utterly needlessly and the lives of others, possibly systemically across the whole economy, we tend to want to regulate it so that doesn't happen. There are many such examples in finance which is why we have regulated it in so many ways for so long. Sometimes the regulation will be effective, sometimes not, sometimes it will be fair, sometimes not, sometimes it will be captured by the powerful, hopefully mostly not. Without it, eh, we head for some big trouble, at worst class and civil warfare.
(Separate but somewhat related note: "You need to agree to all future changes to this contract by your counter-party in all circumstances" - OH HELL NO that's not ok and should not be considered remotely legal, yet there it is in every single click through you've ever bothered to read and fail to understand on the internet because the click throughs (not contracts for mine) are simply not capable of being understood without the assistance of layers of courts, lawyers and judges - the law on them is not settled anywhere on earth as far as I'm aware. Unconscionable conduct in such things is the norm, pretending otherwise is silly no matter how libertarian I want to be about it and life in general.)
There are ALL KINDS of regulations around banking and credit reporting. All of the wacky things you mention are already not allowed.
You can't take your business elsewhere if you don't like the provisions on account of the fact that they ARE wacky. You can't renegotiate wacky contract provisions. Market failure.
But do you want to live without a house, a job, running water, electricity, internet, a cell phone, a car, etc.?
Point a gun to my head and I'd still feel like I had a better chance of getting out of that situation than opting out of credit reporting.
Of course the courts are unlikely to fall on my side because the consequences for contract law would be apocalyptic but I believe it is true in my heart, and that's what really counts.
I though consent required option.
Think of the other use of the word, generally reserved for sexual intercourse. Imagine that 'consent' having strings attached.
Want to go to college? Consent. Want electricity? Consent.
I think we can all agree this would be ludicrous. That Consent would not be real. It would be viewed for what it is: taking by force.
It's why we don't even allow many actions when power is involved (subordinates). We view the power imbalance as so extreme, that invisible strings can form, thereby removing the ability for the subordinate to truly freely consent.
As an American society, I think this is understood. We value consent in many places. Yet for some reason, the financial institutions can redefine consent as they see fit, blatantly attaching strings to basic survival needs.
We had no say. We certinly had no vote. Yet it's a simply ubiquitous tool that cleanly defines the behaviour of some man.
A relentless normalized nudge. The Man and his System FTW.
Why should you? It's the credit grantors who use it. They say "when I grant credit to someone with a score of 800, I'm much less likely to lose money. If they have a score of 600, I'm far more likely to lose money." It's their money, your only say is whether you accept their terms or not.
And this is related to the reality that individuals are at a distinct disadvantage for being largely unorganized and unable to bargain collectively, or else they probably would blackball bad lenders and credit bureaus for a history of untrustworthiness.
But they can't; their only tool is the democratic process. We ought to ruin Equifax to the same degree any one of us would be ruined if we had been so careless.
That's why we have the FTC, GBLA, FCRA and all of the regulation associated with both credit industry, CRAs, banks, etc.
They current "credit tracking" systen has massive over-reach. So much so that if there's a breach/hack thousands if not millions are subjected to those mistakes. __And__ we have no choice but to say "Thank you sir. Can I have another?" We have __zero__ alternatives. Normalized or not, that's unacceptable.
There is a differnce between evaluating my credit worthiness and mitigating your risk, and imposing a monopolistic over-reach program that controls the fate of so many.
Why are you singling out "credit tracking" here? There have been other, much worse breaches from companies unrelated to the credit industry. Where's the $125 from Marriot? Or Yahoo!?
This is already a widely accepted theory usually called the "Social Contract".
Granted, I could just not understand what’s in the contract.
Any system you are required to provide information to should also allow you to see when your information is accessed and by whom. In most cases you should also have the option to deny access unless specifically granted.
Unfortunately not providing access could result in not getting credit, insurance, or work as no company will take on the risk - but you have the choice to opt-out.
Credit reporting services provided by the likes of Equifax and Experian particularily commercial rather than personal credit are critical to the current speed of the economy. Shutting them down would have a devestating effect on the economy.
I like the limit to be low as it limits the potential for damage if anyone gets hold of it and the bank doesn’t cover the loss. Possibly a needless concern though.
My credit score was precisely 0 for many years. I didn't know until I went to buy a car. There was an incentive to get a spoiler and leather seat upgrade if I financed. But, the finance guy st the dealership said I didn't qualify due to a credit score of 0. Shook my head st the absurdity of this. Wrote a check and paid in full. Didn't get the free spoiler and seats.
Insane that I can pay for a new car cash, yet don't qualify to finance it.
I have paid no credit card interest for many, many years. I paid a few dollars once many years back after paying a large income tax bill.
My credit scores are quite good.
The issuing bank is still making money on the fees to merchants. That’s more than enough to cover the cash back they pay me. I’m not the most profitable customer probably, but I am still profitable for them.
Yes. You do. Until China (in this case) and other nations stop hacking US companies.
They need to allocate more, and if it puts them into bankruptcy (it won't), there are legal processes for handling their liabilities.
3.36 billion USD
I hope I have bought enough street cred to say the following by ghostwriting hundreds of letters to the credit reporting agencies to fix their problems, which are numerous and essentially inevitable given their model and present operations.
Credit scores are important because they allow banks to do standardized, automated underwriting for effectively free at 2 AM in the morning, which is what makes credit abundantly available in the United States and one of the reasons why it is so cheap to the middle class. (This routinely escapes the notice of people in the middle class, but the ordinary operation of banks is to advance well-organized people money for free and pay you to be chosen to do so, partly due to credit scores making this a derisked proposition and partly due to interchange revenue.)
Credit scores decimated the costs of unsecured consumer loans, as is readily observable by seeing what loan availability, pricing, and the "credit box" looks like when they're not available for underwriting. (This is a term of art in consumer credit that I provide for your future Googling pleasure, not having enough time to explain it at the moment.) Compare the cost on a cash advance on any card in your wallet to a payday lender. That delta is substantially (not solely) due to credit scores, both in improved understanding of default risk and in reduced operational cost (of underwriting and servicing, both enabled by the scoring infrastructure).
Credit scores are an important justice-enhancing technology because they make the inputs to an underwriting decision objectively observable and for the first time in history those inputs provably do not include race, religion, etc.
There is an argument which is not immediately dismissible that credit scores are based on borrower behavior which reflects the socioeconomic realities of the United States and therefore somehow effectively encode race, but it is an obvious improvement that banks now mechanically reach the same decision on similarly situated white and black borrowers. Regulation did not make that happen. FICO did.
I think well-off computer programmers should understand that there is a societal tradeoff which buys "middle class black Americans have the same access to credit you do" at the cost of Equifax knowing your credit limits; understand that if you are advocating for rolling back the second you should accept that ceteris paribus we will experience material disimprovement on the first.
(Obligatory disclaimer: personal opinion here.)
 More than happy to be corrected here with sources, I just have not ever heard about Equifax-like company in Europe
Most companies giving you a credit of some sort (banks, phone contracts, ...) are required to do vetting of you.
To help them do that, they use credit rating bureaus.
In Europe, you as a private person just don't know it and don't have access to your own rating. But you are likely to be rated anyways..
Here is one danish example (at least three exists)
In the E.U., there are no private organisations who can process your personal data without making it available to you on request.
In Ireland, there's a state-run Central Credit Register, to which lenders must submit any consumer credit agreement above €200, and which they must check by law before issuing credit. Anyone can apply online to get their credit history from the CCR, and make submissions to correct inaccuracies.
There's also the Irish Credit Bureau, a private organisation with a similar purpose. They are also required to reveal data held about you on request, and correct inaccurate data held.
and I believe that in the end (now it is partial/experimental/in the works AFAICU) there will be an European Registry at the BCE (Anacredit):
Though there is no "public" access to the data in the Centrale Rischi, you can have it going in person to the Bank of Italy, the issue is that - if you find an error/mistake - it must be corrected by the bank/agency/whatever that made the erroneous entry, and this can sometimes be a nightmare, not so much with banks, but with smallish financial service agancies (that might have - in the meantime - changed property or going in default, etc.).
> AnaCredit is a dataset with detailed information on individual bank loans in the euro area. The name stands for “analytical credit datasets”. The ECB launched the project in 2011 – together with the euro area and some non-euro area national central banks. It uses data and national credit registers to achieve a harmonised database that supports several central banking functions, such as decision-making in monetary policy and macroprudential supervision.
In Denmark I'm mostly aware of RKI, which seems to be owned by Experian now. If you fail to pay your loans, you end up on that bad payer list. Otherwise getting a loan is a private matter between you and your bank unless you want to use a third party lender
The Wikipedia snippet:
The credit scoring is widely used in Denmark by the banks and a number of private companies within telco and others. The credit scoring is split in two:
Private: The probability of defaulting
Businesses: The probability of bankruptcy
There are a few companies who have specialized in developing credit scorecards in Denmark:
Experian (generic rating for business)
Bisnode (generic rating for business)
I really hope they leave the EU and stop bothering us with their shitty ideas, credit reference beeing one
We don't want national identity cards; the Blair government tried to introduce them in 2006 and failed due to massive public opposition. We think it's a bit weird that other EU nationals are so tolerant of the government having a massive centralised database tied to a single token.
>For a long time, no pin code on credit card, so that theft is easier
Most of our debit card market is Visa/Mastercard, so we switched to Chip and PIN in 2006 - the same time as most international markets. Some European markets had their own local debit card schemes but these schemes were far from perfect.
>Basically they keep the stuff which trick the consumer, whereas in Europe they make law to protect consumer.
Last time I checked, we were still in the EU and still subject to EU law. We implemented the GDPR (and our regulator is one of the most proactive in actually enforcing it), we implemented the Consumer Rights Directive and we were well ahead of the curve in many areas, particularly distance selling and consumer finance.
Surely there’s some third alternative other than “incompetent credit bureaus enable fraud” and “minorities have bad access to credit because lenders are super racist”?
Also except for the risk that financial problems will force a cardholder into accruing interest, and often that interest will get a lot worse if payments are missed a 5% card changes into a 22% card if more than some number of payments are late and some number may be just 1.
Fortunately, credit scores usually recover rather quickly from one-off delinquencies if you stay current afterward. And I bet you'll be paying more attention to your bills now, won't you?
The credit score is doing exactly what it's supposed to.
My wife & I both have excellent credit scores, and we pay all of our bills in full every month. Nevertheless, I've noticed a ~50 point swing in credit scores from month-to-month, all dependent on whether airline tickets, furniture, or charitable contributions happened to make it onto this month's bill. Our debt-to-liquid-assets ratio is something like 0.1%, so there's never any real risk of not having money to pay it off, but of course the credit bureaus don't have information about our assets, so they evaluate us against what other people our age have, which (being Millenials) is not very much.
Knowing how the system works, we can take steps to game it, like not putting any major purchases on credit card in the 3-6 months before getting a mortgage. But still, it's slightly ridiculous that something that's supposed to measure your creditworthiness can swing so much over short time periods.
50 points also isn't likely to make much difference, especially if your score is already good. Loans basically go off tables. Essentially if you're between A and B, you get this rate for this losan, C and D gets this rate, etc.
Once you're past 700, you're already getting good interest rates and banks will fall over themselves to loan you money if your income supports the loan size. When I was at 780, the loan officer couldn't give me a lower rate on a mortgage - I was already getting a fraction of a percent over prime.
I spend between $1000-$2000 on credit cards a month and collectively I generate statements with less than $10 spread across 4 cards. My credit score is rock solid from month to month.
If you have six figures of liquid assets (what 0.1% debt vs liquid assets implies) this should be no problem at all.
I wonder how much your ability to game it indicates whether you are likely to be a good or bad debtor?
In any case, I read this as the notice that payment was required is what got lost, not the payment itself.
Let me tell you what I hear as a business person if you tell me my letter to you was misdelivered: "My mail delivery is unreliable so it's your problem."
Well, no, you didn't tell me it was unreliable, so I couldn't adjust my risk perception or take special precautions. And if you ever want to do business with me again, you're going to come in and execute the transaction on site and not leave with the goods until the bank confirms it's cleared.
On top of which, most billing contracts specify that payment is due whether or not you were notified. You are supposed to keep track, too.
And yes, this is okay, because until we have a proper socialist system, it is, in fact, our responsibility to pay our debts. Don't like it? Don't incur debts.
Anyway, we’re back to making it the responsibility of the customer with a thousand more important things to think about, rather than of the business that’s dedicated to the stuff.
And if you think it should be that way, great. But it’s obvious to me that it is that way because of the power imbalance, not because it’s right.
If you don’t make payments as agreed, your credit score goes down. If you do, it goes up, and will soon recover from the perfectly reasonable dip it took from your mistake. It’s pretty simple.
policing people and make the poor to pay more.
"Why are people defaulting on their bills!?"
The whole notion of transfer of majority responsibility to an individual is one of the slimiest things in this society. We get monitored by an array of hidden surveillance measures and algorithimic judgement we have no way to properly counter or defend ourselves against. Meanwhile central credit gets to borrow money and get bailed out.
Give me a fudging break.
You are trying to make everyone else responsible for my finances and I'd damn well thank you to stop, since they're mine.
1. Make a mockery of prudent allocation of money and get bailed out when their games get messed up
2. Mess up the purchasing power of any money you possess far more than any individual defaults or even class of individual defaults
3. Impose grave and hidden responsibilities on individual borrowers and mass surveillance...
They are messing up your finances far more than the most reckless individual borrowers ever could. *
PS - How is finance going to deal with the multitrillion dollar pension bomb? With prudence or with a combination of a game of musical chairs and chickens until stuff gets serious? How is your financial discipline, as an individual, going to protect you from manmade tsnumais?
As for your PS, I don't respond to conspiracy theories.
Is the World Economic Forum a purveyor of conspiracy theories? Is our reduced purchasing power at the level of food and rent a conspiracy theory?
Edit: My apologies, here's the actual WEF press release
Is an oxymoron. Statistics exist when "you" is unknown.
Between the "Pay for Delete" scams and the gamifying of your credit score through services like CreditKarma I really questions how close these scores are hitting anymore in relation to relative credit risk.
Does that not qualify as extortion?
Thanks for making ridiculous assumptions and putting nonsense in my mouth. Nobody opined on anything in the first place. I was merely asking a legal question, because calling someone to demand an immediate payment to avoid direct harm to them sounds an awful lot like extortion, whether I like the approach or not.
If you want to know whether I'm impossible to satisfy or whether I think the company could in fact cut people slack while getting their $15 and avoiding potential extortion, you could just ask me. Yes, I think that's perfectly possible. Call the person up, tell them you'll waive the credit report if they make a payment by the end of the day, and optionally remind them that according to their contract, there is a $15 fee if they pay by phone. There. Now the person gets to spend more than 5 seconds thinking about it to make an informed decision. No need to put nonsense in my mouth.
Guess what popped up on my report this week?
A late payment.
It does not let you pick the autopay date, and instead puts it on the date the bill is due, otherwise I'd have it auto pay at the first of the month weeks before it was due. However, it is not worth my time to call and probably have to deal with a call center for an hour before I get someone that will promise to remove it and then have to write three letters to send off to the CRBs to dispute it and wait another couple of months for it to possibly get removed.
Places can report whatever they want to. And you can dispute it, but the person who report it will just say "no, we're right" and it'll stay up.
I've been fighting with Equifax and TransUnion for 5 years to remove 30 year old reports on my credit history (which are clearly not me because im less than 25 years old)
Following that logic the Burj Khalifa is a space elevator because no one has been able to build a better space elevator than that.
I have general objections to this sort of underwriting assessment being an ethical business for a private organization to begin with due to the immense amount of possibility for discrimination it opens up.
While there are certainly some arguments to be made about disparate impact under our current system basically everyone agrees that access to credit for minorities is much much better than it used to be.
Why double down and try to make something that is already being gamed? The very definition of insanity is doing The same thing over and over again and expecting a different result.
There is no right to operate a business that exposes everyone to risk they have no choice in whether to accept or not. Centralizing excessive amounts of data with obtuse and dubious control mechanisms/capacity for redress is a disaster waiting to happen.
Publicizing the risk, and privatizing the profits at it's finest.
To me, this entire industry reeks of people engaging in risky behavior, but trying to externalize the costs/risks of said risky behavior, and consequemces be damned. Furthermore, they want the agency that gets externalized to "make money", something which encourages the minimum amount of investment humanly possible in making sure they are actually solving the problem in a way that doesn't merely create new ones.
Furthermore, it seems to me that the financial sector is eating the bloody world; as the metrics they gather are being gleefully used as discriminators in far more than just loan granting.
The system is either so critical to the way the economy works, that we should be willing to "sink" money in the interests of making the system as effective as possible (I.e. no dark pattern B.S., easy to use controls, easy to manage all interactions with, and maintained to the highest degree of security), or it isn't, and a discussion needs to be had whether having such valuable pots of exploitable data is something we should even tolerate as an acceptable exercise.
To be quite honest, I've seen more harm than good come out of the system given the ubiquity of the Credit history "bootstrap" problem, and now the compromise of a huge portion of the American population's personal data.
Trying to couch this as merely a case of "oh, we just need more contracts" without addressing the central problem of your identity essentially being hijacked by a bunch of for profit involuntary surveillance companies operating under an incentive structure pushing minimum viable effort in protecting your data, ensuring it's correctness, and restricting access to only appropriate reasons.
Throw in the failure of the FTC to clearly levy a strong enough penalty leaves me feeling this industry is a social liability in it's current form.
I’m sure the existing credit bureaus are great for the people who give them money. They sure suck for the rest of us, though. Fortunately for them, we get zero say.
The thing is, we don’t get to choose whether we’re exposed to those risks. It happens whether we like it or not.
So let’s say I start a company that offers better TCO: my rates are a bit higher but this is more than made up for by a much lower fraud risk. Do I win the market? No, because Equifax’s fraud risk hits my customers just as much, so I’m not competitive.
Credit bureaus give us low rates because they externalize the costs. Since the costs are externalities, competition can’t beat them. It’s the financial equivalent of making cheap electricity by poisoning the community with emissions.
The gist was that if all their rates are based on a standard formula with no individual discretion, they are safe from regulation around (1) discrimination, (2) risky lending such as led to '08. That sounded more important to them than actually accurate risk modeling, especially since their competitors are all using the same formulas.
(edit: In particular, even if you offered them access to much more effective/predictive data points than the credit score, they would not use them because of (1) and (2) above.)
Large organizations are astoundingly good at finding inefficient ways to spend money.
Equifax is just as shady as those lenders - more so IMO because they have absolutely no obligation or business relationship directly with the individual's whose private data they compromised.
Why am I supposed to take it as a given that if these organizations use the info it must be useful, then?
Regarding the subprime crisis, the biggest victims were the largest banks -- the most sophisticated being put completely out of business -- so not sure what the bit about pension plans comes from (many of those made a lot of money on it).
This isn't necessarily true.
A counterargument is that credit scores offer banks an easy way to outsource what often ends up being a very contentious, politically-fraught process. Yet many analyses have found credit scores barely better than random dice -- the guy with the perfect credit score has a perfect credit score, until he doesn't and there is a wake of delinquency in his wake.
It's also helpful to assess real world motivations. Extraordinarily few of the employees, including at the executive level, at a bank are legitimately concerned about the long term risk to the bank. Success is measured at the quarterly interval, and if you can justify your actions on a quantifiable measure -- even if it's a measure that has little predictive value -- then that's just perfect.
The biggest indicator that someone is a credit risk is that they are maintaining or growing higher interest borrowing products, such as carrying a balance on a credit card. This is an absolute flashing light indication that someone is over-extended, yet the credit monitoring agencies would not bite the hand that feeds them by making too big of a deal about this. Indeed, gross over-borrowing is barely a blip on a credit report, because the people who lend the money ensure that it isn't. The world is absolutely awash in cheap cash and banks are desperate to lend it.
In the wake of the subprime crisis everyone said "oh yes, of course there's a problem there it was the credit agency that was just marking these all wrong", but exactly the same thing is happening on personal credit reports. Of course it is, because the credit reporting agency is there to legitimize whatever the bank wants to do.
What we'd need to demonstrate your claim is for example some data linking credit scores at time of loan to default rate, adjusted for income and loan terms.
would've put a dent in their wallet and hopefully caused them to go bankrupt.
IOW, good luck getting any money from them?
I would guess the kind of person who is paying enough attention and was willing to spend the few minutes it takes to sign up for this settlement right away, is also using some kind of service like Credit Karma (or Mint might qualify now as well). So a lot of these people might actually have it covered.
This all sounds terrible but there are going to be zero consequences.
Edit: I missed my final line, “So you are right.”