[cactus2093]

The credit system in the US is already a pretty horrific version of this, and nobody really seems to care and it’s been like this for decades. And it’s not even just used for credit anymore, renting an apartment now usually requires a credit check.

I had thought credit karma and similar services were at least adding transparency to the industry but was recently in for a rude awakening when trying to get preapproval for our first mortgage. It turns out, the whole idea of a credit score is kind of a lie. Your credit report can be pulled by creditors, and creditors can interpret it in different ways as they see fit. Services like credit karma are just making up their own score based on the report which can be drastically different than what the creditor decides it is. And credit pulled for different uses somehow ends up with different scores, e.g. for a credit card approval your score will often show up higher than for a mortgage. You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report.

It’s insane and the fact that this fairly old and low-tech institution has not managed to be regulated successfully or made fair to the average person, bodes very poorly IMO for regulation of privacy and fairness based on future technology.

[lotsofpulp]

> You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report.

There is no “the credit score”. Any lender is free to use whatever scoring algorithm they like. And they do. Some lenders may choose to use certain scores for certain things, but underwriting has no obligation to use one specific credit score.

Therefore there is no reason for people to care about their credit score, whether it be from FICO or credit karma or whoever.

The only thing you should do is make sure information on the credit report is accurate. And what is your source for claiming you can pay to get things removed from credit score? It doesn’t even make sense, as it just shows the status of your lines of credit. You can’t just make a line of credit disappear as no credit reporting agency or financial institution is going to want to commit fraud for any amount of money that an average person might offer.

[njarboe]

Credit reporting agencies and financial institutions commit fraud all the time. They call it identity theft so that you think it is your fault instead of their fault. No one would care about a bank giving a loan to a person that was impersonating them except for the fact that the bank (credit card, mattress store, car dealership, etc) commits fraud and reports to the credit agency that you have defaulted on your loan when you have not. Then the credit reporting agency also commits fraud when they sell this false and damaging information to others.

This is the big lie. That "identity theft" should be the problem of the person who was impersonated. Pass laws that heavily fine entities that give false information to credit bureaus and fine credit bureaus who give out false information. "Identity theft" would no longer be something that people would worry about.

[lotsofpulp]

I agree that the consequences of identity theft should fall on the financial institutions and credit reporting agencies.

[mindslight]

That's not fraud. The tort you're looking for is libel. The "Fair" Credit Reporting Act explicitly immunizes the surveillance bureaus against the tort of libel. This is actually another instance of regulatory capture.

[njarboe]

Yes, you are right. It's libel.

Wow, I did not know that the surveillance bureaus are exempt from libel. What an incredible law against the interests of the people. That explains why I've never heard about class action suites against them. I'll have to read up on it. Thanks for the info.

[gruez]

>Credit reporting agencies and financial institutions commit fraud all the time. They call it identity theft so that you think it is your fault instead of their fault. No one would care about a bank giving a loan to a person that was impersonating them except for the fact that the bank (credit card, mattress store, car dealership, etc) commits fraud and reports to the credit agency that you have defaulted on your loan when you have not.

That's literally what not fraud is.

>In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right

If some guy walks into a bank and claim they're you and they believe it, the banks aren't gaining anything. If anything, they lost money. Wrongly reporting the default to the CRAs also doesn't benefit them either; it's not like they compensate the banks based on how many default reports they send in. Finally, it's missing the "intentional" part. Lax security practices are negligence at best.

[njarboe]

Maybe a better way of say this is that the bank is committing libel when they report to a credit bureau that you have defaulted on a loan when you have not. They say you did something that you did not do and the fact of them declaring that lie does you damage. The important thing is that "identity theft" should be a problem for the entity that made the loan to a criminal and not the person that was impersonated. Call it "bank libel" when someones credit score is ruined by a bank that gives a loan to the wrong person and one is closer to describing the truth of the situation.

Edit: mindslight mentions in this thread that: "The 'Fair' Credit Reporting Act explicitly immunizes the surveillance bureaus against the tort of libel". Amazing.

[bsanr2]

>If some guy walks into a bank and claim they're you and they believe it, the banks aren't gaining anything.

They would have just sold a loan.

>If anything, they lost money.

Can't they sell the defaulted loan to collections?

>Lax security practices are negligence at best.

Systemic, known, and long-standing negligence speaks to intention.

[gruez]

>They would have just sold a loan.

Yeah, that's what their books say, but that doesn't necessarily match reality. In reality they gave $1000 in cash to someone, and their expected return on that is a fraction of that. Same logic if you bought paid $800 for bonds with face value of $1000, but unknown to you, the bonds are actually junk bonds with a expected value (factoring in repayment and default) of $500. In that case your paper gains are $200, but in reality you actually lost $300.

>Can't they sell the defaulted loan to collections?

They gave the bad guy a loan for $1000. They're out $1000. They sell the loan to collections for $300, they're still out $700.

>Systemic, known, and long-standing negligence speaks to intention.

Security exists on a spectrum, and there are trade-offs to be made. Clearly the banks don't have an interest in selling fraudulent loans, and putting up too much barriers when it comes to authentication also has costs.

[bsanr2]

Does... interest stop being a factor? They gave an x-year loan for $1000 at x% APR (was it subprime?). Also, penalties. Collections can go after you for the full amount. They buy it from the bank for the original $1000+.

Or, the loan hasn't defaulted yet. The bank suspects it will. They load it into a bundle, get it highly-rated, sell the bundle. They make a profit. A whole bunch of other people get hosed.

>Clearly the banks don't have an interest in selling fraudulent loans

This is the wrong decade to be making that statement.

[lotsofpulp]

> Can't they sell the defaulted loan to collections?

Why would anyone pay face value for a defaulted loan?

[awslattery]

"Pay for delete" in collections reported has transitioned from a rarity, to most RMA agencies offering it directly in their initial letter and websites. None of the credit bureaus have pushed against this publicly in the last 3 years of it being more widely adopted.

[lotsofpulp]

If the owner of the debt accepts a lower cash payment in exchange for canceling the debt, I don’t see how that’s a problem for the public. It’s a problem for lenders, but seems like they’ve caught onto it: https://www.nerdwallet.com/article/finance/pay-for-delete

[awslattery]

In my experience, I've been able to settle for less than full balanced owed (the collection agencies buy them by the bundle for pennies on the dollar), and all negative tradelines removed (original charge off and collection account) under new (2018ish) publicly listed policies of doing so.

This approach is mainly used by third-party debt buyers, like Encore/Midland/Cavalry. And doesn't apply to public judgments, if they decide to pursue that route. Thankfully, I have managed to avoid that in my credit recovery journey.

First-party (original creditor) will laugh or tell you it isn't possible if you ask for a PFD settlement, but there are documented instances of it happening as early as 2010 in my research for "making the case" before these policies started to become more widespread.

[pxeboot]

> And what is your source for claiming you can pay to get things removed from credit score?

It is definitely possible to do a "pay for delete" to have negative info removed from a credit report in exchange for payment.

[lotsofpulp]

It’s not the credit reporting agency that’s doing it though, it’s the lender.

https://www.nerdwallet.com/article/finance/pay-for-delete

I don’t see what the problem is if the owner of the debt agrees to erase the debt.

[syshum]

>> And it’s not even just used for credit anymore, renting an apartment now usually requires a credit check.

Renting an apartment is credit, I am not sure why you view it has something other than credit?

The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments

How is that not credit?

A better example is employers using it for hiring choices which does happen as well, but using an apartment as an example of bad uses of credit I think it misguided

>>. It turns out, the whole idea of a credit score is kind of a lie. Your credit report can be pulled by creditors, and creditors can interpret it in different ways as they see fit.

Yes the individual or organization that is loaning you a large amount of money can choose how they use the credit report they obtain for you. Again here I am not sure why this is a revelation or a bad thing.

There are also many different and competiting credit scores no person as "a credit score" there are at least 5 if not more credit scores out there and different institutions will use them in different ways. FICO being the most common but not the only

>You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report.

Yea I believe these institutions should also have to release your personal score with your annual free report, Congress should fix that omission from the law.

[gruez]

>Renting an apartment is credit, I am not sure why you view it has something other than credit?

>The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments

Not really. In most places you have to pay first and last month's rent, which means you're paying for the service before it's rendered. Therefore they're not extending credit, as you have already paid for the service in advance.

[syshum]

Well there are a few problems with this

1. I would like you to define "most places" as for the first 35 years of my life I was a renter and in that time I only ever had to pay "First and last" in one instance. Most of the time it was The first months rent, and security deposit(which was often something small like $100 or $200), no "last months rent" so around here it was not "most places"

2. Even if you use that as a metric that is more like a down payment than a "services paid in advance", unless you are on some kind of month to month with no lease. Every lease I have ever signed shows the TOTAL of all payments which are paid in 12 installments just like a loan, if on month 6th you just move well you still owe the other 6 payments (less any down payment aka last month you prepaid)

The owner is absolutely extending you credit for the use of the property, If you sign a lease for an apartment for $1,500 a month for 12 months you are agreeing to pay $18,000 to the owner for the use of the property, you have both agreed to pay that over 12 equal payments, and in your hypothetical the owner has asked for a $3,000 down payment on that loan in exchange the owner adjusted the terms to 10 equal payments

[gruez]

I'm not sure I follow here. The transaction might be structured as the landlord giving you 12 months of housing service at the time of signing of the contract (or when the lease starts) and you paying him in installments of 12 payments (with the first one or two upfront), but you don't "take delivery" of the service all at once. It's given to you on a continuous basis. Therefore, at any moment during the 12 months, you don't owe the landlord anything.

[syshum]

The second you sign the lease you owe the landlort the full amount. It is a debt you owe.

Does not matter if you realize the use of the property or not, for example if you signed a Lease on an apartment in January, then due to a global pandemic you could not move (through not fault of the landlord) in until July you would still owe the rent for the 6 months even though you did not occupy the unit.

[cactus2093]

Renting is not credit because you don’t get the thing all upfront and then pay for it later. If fact if anything, the renter is giving the landlord up to one month of rent as credit because rent is usually due on the first of the month in order to be able to live there that month. But that’s just sort of an artifact of the discretization of the payment, as far as the arrangement goes there is an ongoing equal trade of values between both parties.

As far as banks being able to make their own credit decision, that’s all fine and good but then they pretend like that’s not what’s happening. If I ask a bank why they denied my loan, they won’t tell me about the specific activities I’ve done that prove me un creditworthy (sometimes I can press to ask what they can see on my report and if they’re feeling nice they may tell me, but they don’t have to). The fact that there’s no party you can ask to just evaluate ahead of time what the result will be, or to see what i can do to get myself above the threshold, so the individual is always at a disadvantage of information asymmetry, is what makes the system bogus. And then on top of that, just the act of seeing if you qualify for the thing lowers your credit score further!

If I’ve been burned by this as a high paid tech worker with just a couple of mistakes in my autopay settings in the past, I can’t even imagine how big of a problem this is for people who have had actual hardships.

[syshum]

>>Renting is not credit because you don’t get the thing all upfront and then pay for it later. If fact if anything, the renter is giving the landlord up to one month of rent as credit because rent is usually due on the first of the month in order to be able to live there that month

You have a fundamental misunderstanding of how a lease works, you are equating it to something like a prepaid phone bill, and that is not at all what a lease is

You are obligated the pay the full amount of the lease, if you up and move in the middle you still owe the landlord the full amount.

The property owner would run a credit check for the same reason as a lender would, to judge if you are responsible person that would repay this obligation under the terms of the agreement, it far closer to a loan then you seem to want to give it credit for.

Further the use of credit scores and other background checks only become more important the harder it becomes to evict bad tenants

Something that "there is an ongoing equal trade of values between both parties." would be terminable by either party the second that value proposition changes, this is not the case with Rental property where the interaction is governed not only by the terms of the lease but layers of federal and local laws

>If I ask a bank why they denied my loan, they won’t tell me about the specific activities I’ve done that prove me un creditworthy

If you scroll to my other comments I advocate for changing that, I am a big advocate of personal data ownership and believe any person should have the right at any time to request all data any company collected about them.

>> (sometimes I can press to ask what they can see on my report and if they’re feeling nice they may tell me, but they don’t have to).

You have the right to get an annual credit report from every credit agency every year, that is would they would see

>The fact that there’s no party you can ask to just evaluate ahead of time what the result will be, or to see what i can do to get myself above the threshold, so the individual is always at a disadvantage of information asymmetry, is what makes the system bogus.

Yes and no, there is 100% guarantee nothing is in life, but there are several ways you can get a good fact based analysis of your general credit worthiness, can it predict if a given institution would grant you a loan... no. but it can predict if you have a good chance at some institution giving you a loan.

The lower your general score obviously the less reliable these tools will be, If you have a FICO of 810 + provable long term income then chances are anyone will loan to you, if you have a FICO of 620 well that become more of crap shoot and will be based on many other factors than just your credit score, similarly if you have a high FICO score but unreliable income (self employed) then it also becomes more of a crap shoot.

>>If I’ve been burned by this as a high paid tech worker with just a couple of mistakes in my autopay settings in the past

I hear stories like this often but this is not my personal experience. Not saying it cant happen but companies I do business with do not insta report you if you autopay fails...

You have to be 60+ days over due before it shows up on the credit report... and with all the modern alerting and other tools I fail to believe that a "simple auto-pay mistake" is what caused one to become 60+ days delinquent on a payment

[gexla]

I don't know if this is still the case, but banks at one time would deny you based on poor credit history also. And so, you get to stay in the "unbanked" category which is just another factor which may keep you in poverty.

The FinTech industry has since grown to the point that being unbanked doesn't need to be a thing anymore. It's easy to pick up a prepaid debit card which you can receive ACH payments on.