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The Inflation/Recession Thread

Discussion in 'General Discussion' started by GTE, May 6, 2022.

  1. zzr

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    Because without that history there is no way to determine the likelihood that you will repay. People often look at new credit as free money so new credit users are higher risk.

    The idea is that if you just opened an account for something then you shouldn't open a bunch more credit. It opens people up to over-extending themselves before they realize it.

    With less available credit the risk of default on the existing credit is higher. Keep the account open instead of paying it off.

    If you maintain a balance instead of paying it off every month, you're spending more than you make, so you're a higher risk of default.

    Soft checks do not affect your score. If you have multiple hard checks for the same type of loan then it typically is treated as one check. If you're buying a house and a car and a boat and opening new credit cards, you're a higher risk and your score reflects that.

    I dated a VP at one of the three credit bureaus last year. She and her team had created the first credit scoring models for a number of countries in South America and Africa. The data science behind predicting the risk of extending credit is interesting.
     
  2. NatCH

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    Now, on the actual lender’s side…

    If you’re currently paying off a card, and not using it? They’re gonna be raising your limit and sending you checks that advertise 0% interest, because they know what you’re trying to do.
     
  3. Juice

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    Any hard inquiry into your credit is going to drop the score a bit, but it goes back up again fairly quickly.

    As long as your credit score is above 700 (740 ideally) then you don't really need to think about it. If it's below 650, it might as well be zero.
     
  4. downndirty

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    Inquiries last 2 years. Mine dropped precipitously when I dared look into financing a truck and a motorcycle within the same calendar year.

    This whole shit has to be a scam.
     
  5. Binary

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    I think the system is shit, but it's not a conspiracy.

    A credit score is simply the numeric risk representation of people who behave similarly to you.

    Given how terrible the average person is with money, it shouldn't be surprising that nearly any financial activity will knock points off your score. Who is more risky, the average person who has looked into financing two different vehicles in the last year, or someone who hasn't? Is the person using half of all of their available credit more at risk of default, than the person using 5%? If someone has maintained a good relationship with creditors for an average of 10 years, isn't that person less of a risk than someone whose average credit line is 1 year old?

    The problem is that it all feels so very personal. "All I'm doing is looking into buying a car, and I can afford the car, why are you dinging me?"

    Well, statistically people who look into a new loan are slightly more of a risk than people who haven't, so your score reflects that. It's not about you, it's about the probability of the outcome of any action.

    It's still an ugly system, though, because it's so hard to get out of. Get bad credit, nobody will loan you anything, so how do you build good credit? If you're broke and the only loan you can get is 25% interest, how do break the cycle? A transient bad decision or bad situation can take years to recover from.
     
  6. Aetius

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    I think part of the problem is it seems like you get knocked both coming and going. Have a car payment? Well that makes you a bigger credit risk. Don't have a car payment? Well then you have less credit history, and therefore are a bigger credit risk.

    I have a single credit card that gets paid off every month, own my car outright, and have significant savings. I'm basically as reliable a borrower as is possible. But I still have knocks on my credit report for not having enough open accounts.
     
  7. Binary

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    This is the crux of the issue.

    You are, mathematically, not as reliable a borrower as is possible.

    This isn't a personal judgement, it's a statistical one. A person with a single revolving credit account is, on average, not as reliable as the exact same person with multiple credit accounts. And, as I said, the problem is that it feels personal when it's not. It's just an average of everyone who is like you, with no car payment and one credit card.

    Account balances are not fed into the FICO scores, so your savings don't factor in.

    In some ways you do get hit coming and going, but generally you only get knocked for new accounts when they're new. As accounts age (whether it's a car payment or a credit card) they will start to positively impact your score.
     
  8. Aetius

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    But isn't this kinda the point? We've built a system that we hold up as impartial an data-driven, and just ignore the huge amount of measurability bias built into it. We don't account for savings not because it's irrelevant (it's massively relevant to an individual's ability to repay), but because the credit bureaus can't measure it easily with the access they have. Similarly we account for car loans because they can be measured, but not the act of saving up and buying a car outright.
     
  9. Nettdata

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    The key thing is that the models are skewed to protect the lenders, not enable the borrowers.
     
  10. Binary

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    Well. I acknowledged that I think this system is shit. I'm just pointing out that it's not a conspiracy.

    All of the actions cited here have a reasonable cause to alter what amounts to a numeric risk score.

    The models should, absolutely, account for more than they do. And frankly, I think the over-reliance on a score drives a lot of the perpetuation of poverty; lower scores cause poorer people to pay more. It's not a good system.
     
  11. GTE

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    I also think it's bullshit that a potential employer can check your credit and base their hiring decision off what they see. (the job requirements obviously can play a role)
     
  12. malisbad

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    Sir, that would be racist. They also want to reject the poors.
     
  13. downndirty

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    ....which tend to skew brown, all the way to the community level. Funny how that works, isn't it?

    It's a frustrating system because no one opted into it, and it's not like if there's an issue with the data they collect, say like in a massive security breach that fucked over millions of people, you could do anything about it....
     
  14. NatCH

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    To be fair, poor caucasians are darker, from the outside drinking and doing drugs in the sun and lack of showering and whatnot.
     
  15. downndirty

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    We can all rest comfortably in the knowledge that if you're poor in this country, you deserve it, you immoral piece of shit. If you didn't want to be poor or preyed upon by the financial system, you shouldn't have been born brown, blue collar or stupid....#personal responsibility.
     
  16. Revengeofthenerds

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    to be fair, as we learned during Covid, some people do choose to be stupid apparently
     
  17. NatCH

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    To be fair, anyone who is stupid should be executed.
     
  18. Juice

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    Preach.
     
  19. SouthernIdiot

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    I think the truth lies somewhere in between. There is a lot of evil shit being allowed right now in a lot of areas. Lending, employment, housing, healthcare all need some reforms.

    However, a great deal of poverty in this country is caused by bad personal choices. Both my parents came from large families. Except for a couple of cases, the difference between the siblings and cousins who live in/near the poverty line and those who are middle class or better comes down to how they choose to live their life and decisions they make. It's not black or white.
     
  20. downndirty

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    You're not wrong, but it's fiendishly difficult to defend poverty as the result of someone's bad choices. What bad choices? A DUI? Gambling issue? Ill-advised marriage? Drug use?

    Who gets to decide someone's poor choices doom them to a life of poverty, when some of the most obscenely wealthy have done flagrant crimes (cough cough Epstein)? Why are poor people not given a second chance to recover from bad decisions?

    This is the promise of socialism that is so appealing: you can only sink so far. You can still have some dignity, a roof over your head and enough to get by, even as a cab driver, retail clerk or burger flipper. Lots of young people are driven so hard not because it's what they want, but because it's the only path they are presented with to have their basic needs met. You don't have to look far to find people who did the right things and wound up homeless, in medical bankruptcy or stressed to the point of mental illness, suicide, and a full on breakdown.

    I find the argument that poverty is caused by poor choices a poor excuse. If that were really the case, then we should be doubling down on education, on social programs to give people a second chance as they recover from poor decisions, and actually attacking poverty as the plague it is, causing tons of different health, professional and social issues.