alt Hacker NewsFICO to incorporate buy-now-pay-later loans into credit scores
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Ok, do rent next.
Paying rent doesn't count towards your credit score (at least it didn't a decade ago when I was getting my mortgage). And it's a glaring signal of how the system isn't built for what it claims: evaluating your ability to pay obligations on time. No, the system is built to trap people in poverty and enrich the rentier class.
I left the U.S. several years ago and have completely forgotten about "credit scores" in this sense. I get reminded every once-in-a-while how things that used to feel so obvious and inevitable and necessary for society to function are completely artificial.
They didn't before? It's a credit like any other type, increasing debt burden like any credit. Seems like corru... ahem, lobbying of course. :)
What's interesting here is that normally BNPL only does a soft check.
I wonder if this is going to change.
Equally, I find it weird that companies can ding your credit for not paying but have no obligation to report on-time payments. It should be both or none.
Does anyone else live in a place where there isn't a visible "score" for how valuable you are, but rather only a "credit check" for how risky you are, which is performed if you apply for new credit (buying anything with an invoice, getting a credit card, or taking any other kind of loan)? Meaning that if you have a good income and no history of failing payments, you are basically passing the check with flying colors, and will have the same "score" as someone who has had tons of well-served credit before?
This thing where the score as in "risk" and score as in "business opportunity for lenders" is intertwined, and creates weird incentives for consumers, is that only a US thing or do any other countries have something similar?
Good, it will bring the stupid BNPL ecosystem back to earth, when people stop using it as free money.
It probably makes sense to do so. Not that I condone the FICO hustle. But small loans can add up quickly and delinquencies need to be measured for financial market stability.
thats interesting. I was always wondering what the hustle was, guess that was it- it was outside of the credit system
So are some of us going to get penalized for not having a buy-now-pay-later history?
What is the functional difference between BNPL and credit cards that can explain why it’s become popular? A credit card is literally “buy now pay later” so is it just the ease of onboarding?
The only appeal of these loans is that they weren’t incorporated into FICO score. These companies will all fail once people start noticing their scores drop.
That seems like it makes sense whatever one think of credit scores, it's actually surprising to me that a form of credit didn't show previously.
Aww so I can't use BNPL for my $10 California burrito anymore?
I was looking forward to 4 $2.50 weekly payments!
This would probably only affect the people with the worst credit scores I imagine. I just don't see a ton of 800+ credit score people deciding to spend 5 payments of $20 for a pair of $80 shoes.
This seems like it’s going to harm more people than help. Encouraging fiscal irresponsibility under the guise of improving your credit score. All it’s really going to do is give lenders another metric to deny you a loan, either because of delinquent accounts or too many accounts opened and closed.
How long until my score goes down because I don’t use these?!??
The security and privacy nighmare that the various credit score systems bring on by collecting and storing sensitive data on individuals some way somewhere with some sort of access for someones for something (a very real big brother in esence on essentials matters), is a good incentive keeping people away from loans. The less is more in this case. Avoiding avoidables.
The crime is that in the very essential case of abode it is impossible to avoid for the generic population. Both renting and mortgages require you do disclose your life for organizations and sometimes individuals having financial incentives with you. Making you exposed and voulnarable, no choice is given. It is a must (you and your dependants cannot choose not to live somewhere).
So they do not have to risk their capital gain, allowed to risk your most sensitive personal data.
I always take on debt if it's an option at 0%. Or sometimes even if it's a low promo thing, like 3%.
FICO scores are a joke. They hint at what they use to calculate them, but the algorithms are kept secret. Fair Isaac can't reveal the algorithms, otherwise they'd get gamed. Incentives to keep bad info and wrong info in dossiers are strong, too. If allowed, Fair Isaac would put rumors and other bullshit on n your file, and never take it out.
I honestly have no idea whether buy now pay later is considered good or bad. The article is email-walled so I don’t know.
I was fiscally responsible and didn’t buy things on credit. I had a low credit score.
Now I deliberately pat for things on credit then pay them off immediately to have a high credit score.
Maybe we could replace credit score with an actual measure of financial responsibility?
yet another vague data point mortgage underwriters can use to deny your loan
In corporate back room, "persons score is high enough to qualify and income is good enough but there’s a strong history of bnpl usage. Over 200 accounts ranging from food to groceries and luxury items. Risk to default has increased, thus approval for slightly higher APR compared to peers with none to lower BNPL usage.”
Rinse and repeat this for hundreds of thousands of loans and now bank is raking in (more) profits
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For the line to go up you need people to keep buying more, and reducing costs. But when these costs are people's salary, you end up paying them less, so they can't buy more, thus credit.
The overreliance on credit as a new step in the consumption cycle is an indicator that the whole system is collapsing, but somehow it's supposed to be good news that buying a burrito might be used against you to further drawn you down.
The town is on fire but good news, your house being burned down will get you air-miles.
Theoretically, credit should be used for one thing: to make more money. (not less)
However, instead of using it to buy or construct a machine to triple what you can produce in an hour, the average person is using it to delay having to work that hour at all, in exchange for having to work an hour and six minutes sometime later.
At some point, you run out of hours available and the house of cards collapses.
i.e., credit can buy time in the nearly literal sense, you can do an hour's work in half an hour because the money facilitates it, meaning you can now make more money. If instead of investing in work you're spending on play, then you end up with a time deficit.
or, e.g. you can buy 3 franchises in 3 months instead of 3 years (i.e. income from the 1 franchise), trading credit for time to make more money, instead of burning it. It'd have been nice had they taught me this in school.