[p49k]

> A system that correctly predicts who is likely to pay back borrowed funds as agreed serves both borrowers and lenders.

Such a system can't be built without being unfairly biased against some people who don't fit a certain mold, and thus it should be illegal.

Most of Europe has a much simpler system: Your ability to obtain credit is based on the past several years of income, with a penalty for instances over the past ~7 years in which you didn't pay back debts. That's it; no predictive modeling or scoring or other nonsense; everyone has an even chance at credit.

[gommm]

The European system is not the panacea you make it out to be. I'm French, I lived abroad for most of my professional life, when I came back to France after 14 years of living abroad, no banks would give me access to mortgages, I also wasn't able to rent most apartments because I had no history of working in France and I was a freelance contractor so I didn't have a fixed long term contract.

In France at least, contract workers and entrepreneurs have poor access to mortgages compared to people who have a long term contract (CDI).

Instead, I haven't really lived in the US besides a short stint as a student there a long time ago. But despite that, I have credit cards in the US and have a good enough credit score to be able to get a mortgage.

I actually prefer the credit score in the US, it's relatively easy to manage, there's quick feedback as to how well you are doing (much less opaque than what's there in Europe) and it's more flexible for people not fitting the mold.

[MadeThisToReply]

> Your ability to obtain credit is based on the past several years of income, with a penalty for instances over the past ~7 years in which you didn't pay back debts.

Okay, and using these inputs, what function is applied to determine whether or not to grant the loan? How does that system differ from a "credit scoring" system, apart from that your perceived ability to repay isn't explicitly mapped to a single variable?

[SkyBelow]

>Such a system can't be built without being unfairly biased against some people who don't fit a certain mold, and thus it should be illegal.

Where is the difference between this and any other time where a choice to offer a contract or not occurs? If you are hiring, no matter your interview process, you are looking for a certain mold and good workers who don't fit that mold will be discriminated against. When renting, same thing. When picking a contractor to do a job, same thing.

>Your ability to obtain credit is based on the past several years of income, with a penalty for instances over the past ~7 years in which you didn't pay back debts.

Which is still a certain mold predicting future performance based on past behavior. What about someone who has had poor income and many poor payments but who has just turned their life around and will have great income and be payable and willing to pay off any future debts. You are still discriminating against them because most people with a similar history won't have a similar positive outcome.

[sokoloff]

“Instances over the past ~7 years in which you didn’t pay back debts” is used precisely because of its value in predictive modeling your likelihood to pay back prospective new debt.

[zo1]

Maybe I'm missing something, but you just described a credit score system.

[mortenlarsen]

Yes. But we don't have the stupid gaming aspect where people take on debt that they don't need in order to "build a credit" score.

It is only a proof of income, outstanding debts (that you are required to reveal), and the hopefully lack of past non-payments that count. You can't "build your" score buy using a bunch of credit cards and paying every month.

I live in Europe, and do not have a credit-card (only debit) have no need for credit, since I do not spend money that I do not have.

If I was in the US, I would probably have a credit card to "build my credit".

It is like if I asked my neighbor to lend me money every month and pay them back a second later to build their trust. It is just a stupid game, with no real meaning.

[leetcrew]

there is a performative aspect to "credit building", but it's not all a meaningless game. the fact that someone has access to a $5k credit line and doesn't go crazy with it is a positive signal itself.

[bombcar]

I suppose the difference is that the bank has to refuse you in the EU system, instead of pawning the refusal off to a third party that does the calculation.

[sokoloff]

In the US, the refusal is still from the lender, based on information from zero or more credit reporting agencies.

[bombcar]

Yeah, but they always word it as blaming the agency.

[sokoloff]

That is likely a consequence of a requirement of the Fair Credit Reporting Act under which you must be told when information in your credit file is used against you to deny your application for credit, employment or insurance.

I haven’t been denied in a long time, but my recollection was the refusal was from the lender and included “we may have used information from <reporting agencies>; here’s how you can get a free copy of the information in your file…”