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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

#221

Post by yobbo »

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 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.

As long as inflation is higher than the interest rate, it means having to work less than an hour in total.

(But it's unsustainable in the long run ...)

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

#222

Post by LinXitoW »

rayiner wrote: post #179
lm28469 wrote: post #91

Earlier quoted context omitted.

> the average person is using The "average person" is told from birth to consume as many things and experiences as possible as it if was the only thing that could give their life a meaning. The entire system is based on growth and consumption, I have a hard time blaming "the average person"

There is no “system.” It’s all just people making choices. My wife puts straws in the dishwasher to reuse them. She grew up in America the same as everyone else.

There's no system the same way there's no Facebook, just some databases and servers. Or there's no Java language, it's all just UTF-8 characters. Or there's no government, there's just people voting for other people. Or there's no society, it's all just fancy apes existing and making decisions.

It's quite frankly ludicrous to be a software engineer and pretend systems don't arise from "individual" "independent" elements.

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

#223

Post by lan321 »

Arainach wrote: post #42
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…

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…

This is a bit too romantic imo. From my eyes, it's mostly:

"An old AMG at 20 is better than a new Ferrari at 60."

There's a slider for how well you want to live your early vs late life. If you work hard, you'll be better off later, and if you go crazy early on, you'll be worse off later. However, there is a point in that you can't catch up on 20-year-old sex, getting drunk or drugged up out of your mind or general fun with friends at 60.

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

#224

Post by Hilift »

Yizahi wrote: post #123

They didn't before? It's a credit like any other type, increasing debt burden like any credit. Seems like corru... ahem, lobbying of course. :)

Your credit score can decrease if you pay off your credit card balance or pay it down too quickly. For example, paying off the last $10k on a home loan. The score is also a reflection of your value to them as a paying customer. How much money you can make them, and how reliable you are with regular payments based on past data. These types of businesses may seem off, but if the customer is reliable and makes you money, assigning a low score based simply on the business type is a recipe for litigation.

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

#225

Post by crab_galaxy »

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…

Yeah, I’m not sure if BNPL loans have changed in the last decade at all but the financiers make money on the people who don’t pay the balance by the end of the term. I’ve financed a couple expensive electronics when it made more sense in my younger days and the terms were such that if you don’t pay it off by the end of the term, you owed ~24% of the total bill in interest.

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

#226

Post by xyst »

mritchie712 wrote: post #142
bediger4000 wrote: post #70

FICO scores are a joke. They hint at what they use to calculate them, but the algorithms are kept secret. Fair Isaac can't reveal the algorithms, otherwise they'd get gamed. Incentives to keep bad info and wrong info in dossiers are strong, too. If allowed, Fair Isaac would put rumors and other bullshit on n your file, and never take it out.

the score is easy to reverse engineer if you have the data and pretty much every big bank has the data. source: I worked at a big bank and did this, it was easy. Most of the stuff is obvious and intuitive (don't make late payments). One that's not terribly intuitive is credit line utilization. It has a big impact and most people don't think about it. For example, it's better to have 2k in credit card debt if you have…

You forget the scoring is not based on individual performance only. It also includes your performance compared to those in similar groups or buckets.

Ever wonder why your credit score goes down randomly in one month despite nothing changing?

FICO’s black box algorithm put you in a newer credit group of higher credit scores. In that group, your profile scored much lower compared to others. Thus you get a 10-20 point deduction.

If you have a long history of good credit it probably doesn’t matter. But if you are a young person looking for auto/home mortgages, that 10-20 pt dedication _could_ lead to slightly higher APRs depending on the underwriters own scoring algorithm.

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

#227

Post by allenrb »

scarface_74 wrote: post #60
bitmasher9 wrote: post #57

Earlier quoted context omitted.

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.

As a young person, I was in the “own an old beater” category for many years. That said, I knew how to maintain and repair most of what could go wrong. That stick shift 1995 Accord had over 300,000 miles when a school bus finally totaled it while parked.

But for most people, maybe not the right answer. There’s a middle ground. There are some very affordable vehicles out there with good warranties. Buy one and for a few hundred a month, you get five years free of worry.

Of course, who does that? What I see are mostly SUVs and other “image” vehicles that cost more to buy and more to run. Frugality just hasn’t been an American trait in recent years, though it seems to be changing in some groups.

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

#228

Post by ndriscoll »

al_borland wrote: post #145
varjag wrote: post #129

Earlier quoted context omitted.

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.

Of those who carry credit cards in the US, 60% of them carry a balance [0]. There are also all those reports that have come out about how nearly 40% of Americans don't have $400 for an emergency [1], with the median being just $600. If the rule of thumb for an emergency fund is 3-6 months of expenses, and we can agree that paying interest on a credit card is a bad finical decision, then I'm not sure how the "average"…

[1] is better interpreted as 40% of people who are willing to work for less than minimum wage answering marketing surveys don't have $400 for an emergency. It could still be true, but the bias in the methodology is obvious.

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

#229

Post by anajskkdbf »

bonoboTP wrote: post #148
gottorf wrote: post #40

Earlier quoted context omitted.

> They're a tool to be used responsibly. I used to hate to take the position that government should save people from themselves, but I've moderated a lot on it. Some people clearly cannot use credit responsibly.

Societies used to understand this and put lots of limits around exploiting people, such as banning interest rates. But there is no unalloyed good. That ban also blocked rapid economic development as seen in the 19th century, where credit was absolutely critical for railroad construction and other infrastructure like electric or plumbing. It's a real dilemma with tradeoffs, where slogans and soundbites don't work. Hav…

> Societies used to understand this and put lots of limits around exploiting

They still do (at least in the US). Jewish people have access to Heter Iska loans according to their religion. They do not extend this to gentiles.

Humans have known for a long time usury is inherently predatory. Nobody should profit off simply having money.

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

#230

Post by ta1243 »

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…

When I was in my 20s it would take me 20 hours work to earn 100 units

15 years later it takes 3 hours work to earn the same amount

If I borrow 100 units in my 20s at 4%, it cost 4 units per year

I save 20 hours work, and it costs me 4 units a year. That's 48 minutes work in year one, reducing to 8 minute after 15 years. Overall it costs an average 20 minutes a year for 15 years, or 5 hours of work, then I repay the capital which is 3 hours.

I've spent 8 hours of work rather than 20 hours.

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