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For £100 you get a shiny credit rating for no risk. That'll get you a mortgage for £100,000s. In the 60s/70s it was about knowing your bank manager, so he knew you'd be able to pay. I appreciate that it probably benefited a certain type of person, but the new system probably has the same prejudices built in. Now it's all about the ephemeral and easily game-able credit score. Until a few years ago you would get negatively scored for not having a landline. These scores are utter bullshit, they're simply about if you haven't screwed up yet, they're not actual assessments of your ability to pay or the risk you've exposed yourself to. Again, I worked in the mortgage industry before the Northern Rock collapse, brokers used to be able to go to those guys and openly fudge people's incomes by calling them self-employed, they had a good credit score so no-one blinked an eyelid, get 105% mortgage, and then lo-and-behold, the bank collapsed. Yes, part of it was that they lost their access to easy bank credit, but another part of it was they lent to hugely risky people. As a slight-side, my bank was willing to lend me crazy credit card money a few years ago because for 10 years I never missed a payment. In reality in those ten years I went through a patch of being the most business-un-savvy freelancer ever, selling myself at a stupid rate and not putting enough aside to pay my tax bill, to the point where I had to get a loan from a parent to pay it. I was flat broke, almost bankrupt, and these people were willing to lend me almost 9 months of my income. I was not a good risk. But because I paid on time for X years before, I was to the credit agencies. |
Banks are using actuarial science to make loans. You were (possibly) an outlier. That doesn't matter. All that matters is that their risk models work in aggregate. If they're right enough of the time, they profit. It doesn't have to be perfect.