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FICO to incorporate buy-now-pay-later loans into credit scores

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Re: FICO to incorporate buy-now-pay-later loans into credit scores

#51

Post by Jcampuzano2 »

crazygringo wrote: post #32
PostOnce wrote: post #13

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., credi…

> Theoretically, credit should be used for one thing: to make more money. I disagree. You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. It's not so you can use them to make money, it's so you can use them to enjoy life . > At some point, you run out of hours available and the house of cards collapses. Only if you go too far. The point is to buy things knowing what they'll c…

If you're using credit to buy a car, most people do so in order to get to and from their place of work for the majority of their driving time. In that way, using credit to buy a car still fits into their theoretical model. For example I know plenty of people who completely got rid of their cars when remote work became more common, or at the very least consolidated to smaller cars or to less cars for a family.

Similar thinking for a house. A lot of people when buying a house go into it with the assumption that it is an appreciating asset that will gain value over time. Yes there are other factors of course like wanting to live closer to schools or in the suburbs/good areas, etc. But regardless this is commonly to facilitate a life that lends itself to you continuing to be able to make money comfortably.

Regarding vacations, no financial expert recommends using a card without the intention of not paying for it. If your plan is to book the vacation on credit for anything other than the benefits of your credit card points systems you might as well not use it at all. And all recommend not using credit cards and instead an emergency fund if you lose your job.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#53

Post by clipsy »

gottorf wrote: post #38
candiddevmike wrote: post #24

Earlier quoted context omitted.

For a lot of folks, credit is the only way they're surviving on something close to minimum wage. Or credit was the only "safety net" they had during a rough time. Almost none of these people have the kind of collateral needed to use credit to truly transform their lives, and the government assistance for that is seriously lacking in the US (SBA loans are terrible, and you need enough money to cover your own salary un…

> credit is the only way they're surviving on something close to minimum wage. Or credit was the only "safety net" they had during a rough time In my experience, the average American has no concept of saving money, and those below average even less. It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of…

> It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of their income, however meager it may be, out of an expectation that they will need it.

Congratulations, you've just discovered that human beings are not perfect rational actors.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#54

Post by quitit »

seatac76 wrote: post #8

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.

Yes it's a bit odd that the article poses the question if this will help or harm credit seekers. The point of the system is to provide transparency.

What does need to happen however is that these inputs are properly weighted such that those using FICO can make appropriate decisions. Similar to credit cards, numerous BNPL-purchases do not necessarily indicate that the debtor is in financial trouble. They could merely be using the services for the other conveniences they offer. Whereas seeking numerous loans is usually a negative metric.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#55

Post by msgodel »

PostOnce wrote: post #13

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., credi…

I tried using one of these offering a 0% intro APR to finance an upgrade to the boat I eventually moved into (saving me 10s of thousands in rent.) They wouldn't let me do it despite having an upper 700s credit score.

It's not clear to me how they pick people to lend to.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#56

Post by Jcampuzano2 »

janalsncm wrote: post #49
PostOnce wrote: post #13

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., credi…

Not sure what you mean by the “average person” here but the biggest kinds of debt are mortgages ($12T) and cc debt, student loans, and car loans (roughly 4T total). Is your position that taking debt to buy a house is bad unless you can sell it for a profit? Is working for the mortgage lender to accomplish that not worth it? You can avoid it by renting, but then you’re just working for the landlord, so there’s no avoi…

Every single thing you mentioned outside of cc debt (though arguably you should never reach for a credit card outside of using it for the points systems they provide) could be categorized as something used as a tool to make more money.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#57

Post by bitmasher9 »

crazygringo wrote: post #32
PostOnce wrote: post #13

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., credi…

> Theoretically, credit should be used for one thing: to make more money. I disagree. You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. It's not so you can use them to make money, it's so you can use them to enjoy life . > At some point, you run out of hours available and the house of cards collapses. Only if you go too far. The point is to buy things knowing what they'll c…

Let’s say you finance $40,000 in auto debt over 5 years. With a low interest rate of 6% paying $6,300 in interest. That’s over 15% of the amount borrowed! Many people have lager rates over longer periods.

Now consider what would happen if you invested that $6,300 for 30 years instead of spent it on interest. You’re losing out on tens of thousands of dollars in total lifetime wealth.

When you borrow money to “enjoy life” it can quickly end up costing 2x what it would if you spent the money outright, even if you borrowed at low rates.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#58

Post by scarface_74 »

PostOnce wrote: post #13

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., credi…

And this has nothing to do with buy now pay later since you aren’t charged interest

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#59

Post by Jcampuzano2 »

ajsnigrutin wrote: post #35
PostOnce wrote: post #13

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., credi…

This is all true if you have enough for the basics and are looking above the minimum survival costs. Just to make the money you are making now, you need some stuff, be it a phone or a car, home AC, oven or even a washing machine at home (you can't go to work hungry in dirty clothes). If you don't have the money to pay with cash, you'll be buying that oven/stove with whatever delayed/monthly payment option is availabl…

You are literally describing using credit as a tool to make more money, just some in a slightly more indirect way, thus you are not in disagreement.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#60

Post by scarface_74 »

bitmasher9 wrote: post #57
crazygringo wrote: post #32

Earlier quoted context omitted.

> Theoretically, credit should be used for one thing: to make more money. I disagree. You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. It's not so you can use them to make money, it's so you can use them to enjoy life . > At some point, you run out of hours available and the house of cards collapses. Only if you go too far. The point is to buy things knowing what they'll c…

Let’s say you finance $40,000 in auto debt over 5 years. With a low interest rate of 6% paying $6,300 in interest. That’s over 15% of the amount borrowed! Many people have lager rates over longer periods. Now consider what would happen if you invested that $6,300 for 30 years instead of spent it on interest. You’re losing out on tens of thousands of dollars in total lifetime wealth. When you borrow money to “enjoy li…

Well seeing that you need a car to go to work to have money to invest in the first place…

And before you say “buy an old beater”, then you have to contend with an unreliable car that may cause you to be late to work and get fired. It’s also much easier and cheaper to get a car loan for a newish car than to borrow money to fix a car.

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