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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

#101

Post by DragonStrength »

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…

> You see people dashing over to the nearest rent-to-own rims shop. (If you don't know poor people, you may not know such businesses exist.)

And many on this site don’t recognize a racist dog whistle I guess.

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

#102

Post by forrestthewoods »

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…

> the average person

I’m pretty sure the median American does NOT carry a monthly CC balance. They pay it off in full every month.

But it’s very close to 50%. And may swing one side or the other depending on how fubar the economy is at that moment in time.

So what you said is true for roughly half of Americans. But not true at all for the other ~half.

I think.

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

#103

Post by hnbad »

msgodel wrote: post #79
clipsy wrote: post #53

Earlier quoted context omitted.

> 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.

I mean I guess they get some perceived value out of the rims that makes the stability trade off worth it.

Whatever you put aside is not going to be enough to prevent complete financial ruin if shit hits the fan. You might be able to cover smaller emergencies like an appliance breaking or your car needing repairs but literally just giving birth or being in an accident can bankrupt you in the US. I'm not at all surprised low to medium income Americans would just give up and accept their inevitable financial ruin instead of trying to be maximally frugal and socially ostracize yourself, forego most forms of entertainment/recreation and still not be able to get out of survival mode.

Desperation is a good motivator - but not for rational actions. It triggers our survival instincts: hoard what you can, feed on what you can get, grow fat, make rash decisions. This is what the modern economy is built on. FOMO, impulse shopping, conspicuous consumption, high calorie fast food, deals and discounts on overpriced goods, planned obsolescence, etc. We need consumers to be perpetually desperate and starving. Credit just means we can circumvent Henry Ford's problem of them not being able to afford to buy anything because they still can't afford it but are able to pay for it until their credit line runs out.

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

#104

Post by mihaaly »

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.

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

#105

Post by hnbad »

bluecalm wrote: post #92
Arainach wrote: post #42

Earlier quoted context omitted.

When everything around suggests that the system is rigged against you and care against you, it's no surprise that many people live for the moment and try to find some small bit of pleasure or joy in the moment without planning for a future that may not come. It's easy to say "why don't they save more?" from an upper or middle class stability, but when the price of everything keeps going up, the police are out to get…

It would be easier to buy that argument if it wasn't happening in countries where healthcare is not fast track to debt and police is not out there to get you. I come from such a country and a lot of financially struggling people overspent on status symbols all the time.

Sure, because status matters more than finances. Getting rich may be extremely unlikely if not outright impossible. Looking rich to your peers (and "feeling rich") on the other hand may just be a few years worth of small affordable installments away - even if it's completely superficial and short-lived. And entire industries will literally spend your every waking second trying to convince you that buying their product will make you feel rich.

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

#106

Post by vintermann »

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…

Are you familiar with the boots theory of socioeconomic unfairness?

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

#108

Post by eptcyka »

Tadpole9181 wrote: post #71
janalsncm wrote: post #52

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?

BNPL is 0% interest over N months. A credit card is 20% APY over the total balance over minimum payment. And it's offered by my CC providers. For some larger purchases on a 12 month plan, leaving the money in savings loses me 1.5% cash back but gains me around 3% interest (after accounting for the depleting principle). It would be stupid not to do it sometimes. I don't really get the financer's benefit. Though maybe…

The seller benefits from the increased demand, the financier sells this as a service to the seller.

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

#109

Post by hnbad »

john01dav wrote: post #98
eptcyka wrote: post #93

Earlier quoted context omitted.

Vast majority of new car sales will not let the new owner make more money and were financed with debt. If all of those buyers bought used for cash, nobody would be able to afford used cars for cash. It really is only businesses that can convert debt into income, most consumers do not want to. There is nothing I can spend on to get a higher hourly rate.

You can buy investment properties to convert debt to income and get nice returns. While this is technically a business, there are ways to make it quite passive and thus more like an investment than a business. Margin stock accounts also exist, although I don't know enough to know what situations it makes sense to use them in.

Don't ever look into where the money you make with "passive income" comes from, I guess?

Passive income just means other people are working for your income. At some point, someone has to be poor enough to have to do the actual labor. You can abstract this away with as many financial constructs as you want but it boils down to that. If you can "make money" from mere ownership, we can't all own things that make us money because then we wouldn't have to pay anyone and nobody would have to pay us.

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

#110

Post by vintermann »

pjc50 wrote: post #90
danaris wrote: post #83

Earlier quoted context omitted.

You can't individual financial education your way out of systemic poverty. Furthermore, the common pattern where poorer people spend money as soon as they get it is, in fact, rational when you look at it from their perspective rather than your own (which, as with most people attempting to moralize to poor people about their choices, appears to be a perspective of "you should be doing absolutely everything you can to…

There's also family situations where liquid savings are at risk of being spent by somebody else. I don't think the marshmallow test people factor that in, you'd need to have a third option where the kid waits dutifully for the extra marshmallow but it gets eaten by someone else in the meantime.

Yes. And that doesn't have to be an addict family member or a burglar, it can easily be e.g. a landlord who sees that you have more money, and charges you more money. There are a lot of people in a position to make you give up what you have, if they see that there's money to be squeezed.

This is even more true collectively: as an individual, maybe you can get out by being 50% more frugal than the rest. But everyone can't be 50% more frugal than the rest. If everyone tries, it's even more likely that larger society claws it back through higher rents, lower wages etc.

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