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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

#121

Post by PostOnce »

scarface_74 wrote: post #58
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

Owing money you don't have has disadvantages even without interest.

For example, if you make 5000 dollars a month and get a 5000 dollar BNPL loan for a stereo, payment due in a month, then even without interest, you now either starve or default on the loan (or incur penalties, i.e. the interest you thought didn't apply).

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

#122

Post by IsTom »

andruby wrote: post #118
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…

Do you also think that way about buying a house with a mortgage (credit)? I don't. A mortgage isn't used to make more money. It's used so people can own a house after saving for a few years, rather than waiting until they've saved for a few decades.

You need to compare money paid for mortgage minus price of house against money paid for rent (when you're left with no assets after all the years of paying it).

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

#124

Post by username332211 »

thrance wrote: post #115
gottorf wrote: post #38

Earlier quoted context omitted.

> 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…

I'm picturing you in my head as one of those 19th century Englishmen, writing about how being poor is a moral failure and the famine in Ireland is actually a punishment from God and thus nothing should be done about it.

[flagged]

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

#125

Post by eadmund »

andruby wrote: post #118
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…

Do you also think that way about buying a house with a mortgage (credit)? I don't. A mortgage isn't used to make more money. It's used so people can own a house after saving for a few years, rather than waiting until they've saved for a few decades.

A mortgage doesn’t make money, but it (can) enable spending less money. If you buy a place such that interest, maintenance, insurance, taxes and the opportunity cost of not being able to easily relocate are less than rent, then you have saved the difference.

It’s also a way to force saving, which is psychologically useful (and thus valuable).

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

#126

Post by dzhiurgis »

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…

I bought tons of solar panels with 24 month 0% interest CC for my DIY installation. Kinda makes entire system free. I wish BNPL were offering longer payment periods, few months is not worth the risk at all.

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

#127

Post by eptcyka »

azthecx wrote: post #112
john01dav wrote: post #98

Earlier quoted context omitted.

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.

There are arguments to be made, especially if you're young and just starting out to take a reasonable amount of margin and kickstart your compounding growth. Say you just started working, have no use for your money and are willing to bet 20k on index funds vs a 90% market drop, you should be able to take 2k in leverage and set up your position be auto closed. But of course as you have more money this type of market e…

You clearly are delusional if you believe that the people drowning in credit card debt are in ever in this position.

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

#128

Post by jack_riminton »

avianlyric wrote: post #117
msgodel wrote: post #55

Earlier quoted context omitted.

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.

Yeah a high credit score isn’t what that lender is looking for. They don’t make money of people who actually repay the loans, indeed they tend to loose rather a lot (cost of capital + cost of account admin). If someone is offering you a 0% APR loan, it’s either because they’re hoping you’ll move your loans to them, and become unable to leave once the 0% period has ended. Or they’re trying to sell something else (eith…

Exactly. The thing I always have to remind myself: issued loans aren't liabilities for companies, they're assets. Assets need a return!

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

#129

Post by varjag »

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…

No, an average person uses it to improve liquidity atop overall solid fundamentals. Literally hundreds of million people worldwide do it with no adverse effects and improved quality of life. Irresponsible people are relatively a minority (although they tend to make the news). And aversion to financing is in itself a poverty marker more often than not.

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

#130

Post by jltsiren »

leereeves wrote: post #120
andruby wrote: post #118

Earlier quoted context omitted.

Do you also think that way about buying a house with a mortgage (credit)? I don't. A mortgage isn't used to make more money. It's used so people can own a house after saving for a few years, rather than waiting until they've saved for a few decades.

Often, a mortgage is either used to make money (from rising house prices) or save money (when the mortgage is cheaper than rent).

Often, houses are depreciating assets that are expensive to maintain, but people take mortgage and buy them anyway. Often, renting is cheaper than buying, but people buy anyway, because they like the idea of owning their home. Often, people buy a home, because suitable homes are not available to rent.

Money is only a means to an end. It has no inherent value. And very often, the subjective value of a thing is essentially unrelated to the monetary value.

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