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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

#251

Post by alkonaut »

Does anyone else live in a place where there isn't a visible "score" for how valuable you are, but rather only a "credit check" for how risky you are, which is performed if you apply for new credit (buying anything with an invoice, getting a credit card, or taking any other kind of loan)? Meaning that if you have a good income and no history of failing payments, you are basically passing the check with flying colors, and will have the same "score" as someone who has had tons of well-served credit before?

This thing where the score as in "risk" and score as in "business opportunity for lenders" is intertwined, and creates weird incentives for consumers, is that only a US thing or do any other countries have something similar?

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

#252

Post by Arkhadia »

Hilift wrote: post #224
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…

[dead]

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

#253

Post by jaxn »

Hilift wrote: post #224
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…

That is true when you close an account (like paying off the last $10k on a home loan), but I don't think that is correct when paying a credit card down to a $0 balance and leaving it open.

The reason is that your credit score is impacted by both your available credit (higher is better) and credit utilization (lower is better). When you pay of the last of a home loan and close that account, your available credit goes down and your credit utilization goes up (assuming you had any other debt). Both of those hurt you. When you pay the credit card down to $0 and leave it open, your available crediot stays the same and your utilization goes down.

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

#254

Post by SkyBelow »

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.

Shelter (and, for many, transportation) are a need for maintaining their ability to make money. As such there is some minimum amount that must be spent on these, and loans costing up to that amount can be seen as ways of making money. Most people who make these purchases do buy even more than strictly necessary, and the extra spent above the strictly necessary line should be seen as luxury expenses.

General advice for homes leads to buying a home that does follow the logic, given historic movement of home prices and rental prices. It rarely is put in those terms, but works. For vehicles, the financial recommendation generally is to buy less car as it is a depreciating asset. If you have cash for a luxury expense, then it is no different from any other large luxury purchase, but if you have to finance, go as cheap as possible (but making sure to account for the repair costs, fuel usage, and such, not just the initial cost and loan payments).

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

#255

Post by devmor »

mathgeek wrote: post #97
john01dav wrote: post #95

Earlier quoted context omitted.

I acknowledge that such telling exists, but there is still responsibility for people choosing to listen to it. Skepticism is vital. Beyond being skeptical of what you see, it is wild to me that we don't have approximately everyone blocking all ads, cable news, most social feeds, and other such transparently manipulative shit. Advertisement especially is literally industrialized and research-based psychological manipu…

You can’t block all of it all of the time, and children (some of the most vulnerable) especially can’t.

Or you end up with the opposite end of the problem. I grew up in destitute poverty and was told all my childhood that credit was an evil trap - I should absolutely never use it.

Well, spring forward to me starting a pretty good career as a software developer and wanting to get my first reliable car. I had no credit history and ended up with a 19% APR. That really, really sucked.

It's been 10 years since then and I still get dinged for not having "enough" credit history despite having a couple car loans and several credit cards that I rotate bills on. The whole system feels like it's designed to punish anyone who doesn't fit into the role of a perfect consumer.

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

#256

Post by mantas »

paxys wrote: post #175
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"

Average *American

Nah. More like everywhere besides North Korea.

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

#257

Post by ch4s3 »

alkonaut wrote: post #251

Does anyone else live in a place where there isn't a visible "score" for how valuable you are, but rather only a "credit check" for how risky you are, which is performed if you apply for new credit (buying anything with an invoice, getting a credit card, or taking any other kind of loan)? Meaning that if you have a good income and no history of failing payments, you are basically passing the check with flying colors,…

Credit scores aren't a score of how valuable you are, they're a score of creditworthiness or how unlikely you are to default on a loan. The largest factors are age of credit and payment history. Utilization is also a factor. Someone who occasionally misses payments and has high utilization is going to be more profitable but higher risk to lend to.

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

#258

Post by scarface_74 »

immibis wrote: post #240
scarface_74 wrote: post #154

Earlier quoted context omitted.

You realize almost every phone in the US that you buy through the major carriers has worked like this for decades?

Why would you buy your phone through a carrier? Is it the good old US lack of regulation so it's the only option carriers let you have? I get my phone and my SIM card separately.

Why not? It’s an iPhone the same as any other iPhone with no carrier bloatware. It usually comes at a discount with monthly credits.

Even if I do buy directly from Apple using the Apple credit card, it’s still 2 years with no interest and the same BNPL in all but name.

And now it’s all eSIM anyway. If I go to another country I just activate the second eSIM.

And it was never about the phone makers not letting you have the phone. Some low end phones even today don’t support all of the carriers frequencies and back in the day you had phones that had to support CDMA vs GSM and even then different parts of spectrum were used by different carriers.

Mobile phones at first “free” with a two year service plan and later as a second line item has been the most popular way to buy phones in the US since I was selling them at Radio Shack in the mid 90s.

I would get a commission based on a $300-$400 phone and the customer paid $1 up front.

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

#259

Post by SirMaster »

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…

You can't deny the strong ability to make money using credit or debt though.

No it's not the only way you can use it, but it's a pretty big way that a lot of people do successfully use it.

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

#260

Post by SirMaster »

bitmasher9 wrote: post #236
eadmund wrote: post #136

Earlier quoted context omitted.

The trick is to borrow $40,000 to buy the car at 6% and keep your $40,000 invested making more than 6%. Even at 7% annually, you’d make $16,102 over five years (1.07⁵ × $40,000). For that matter, at 6.1% annually, you’d make $13,782 (1.061⁵ × $40,000). Heck, even at 5.9% , you’d make $13,277! The reason why you make more even with a lower rate is that you pay less interest each month with the amortising loan! The tro…

Personally borrow and invest over shorter periods of time (less than 10 years) has too high of a risk portfolio for me, especially with a depreciating asset. What if there is a market downturn, and you’re out not only the decrease in value of your assets but also the interest in your loan. I admit this is down to personal preference and risk tolerance.

Well if you can't survive a downturn and the risk then no you shouldn't do it. But if you can then you should and in the long run you will end up ahead.
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