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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

#321

Post by barchar »

scythe wrote: post #248
bluecalm wrote: post #233

Earlier quoted context omitted.

It has nothing to do with credit. The whole buy-now-pay-later, 0% rates or pay-day loans industry came much later here. The same goes for predatory marketing industry. When I went to elementary school everyone was poor as it was a year after communism collapsed. People were still spending their last money on shiny things back then even if those shiny things weren't as shiny as they are today. >>Getting rich may be ex…

I think you're half right. But there are cultures in which people save money. (You can just run a web search for "savings rate".) My hypothesis is that "human" nature does play a role, specifically a very general phenomenon in animal psychology called "observational learning". If you see people around you who saved money and it worked out for them, you're more likely to imitate those people. Saving money probably isn…

It has a lot to do with the structure of economies. Usually they're big exporters with fairly stable currencies. The differences in savings rates are super huge, even within cultural groups.

Demographics also play a role as does inequality.

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

#322

Post by benmanns »

asdfasvea wrote: post #250
segmondy wrote: post #247

So are some of us going to get penalized for not having a buy-now-pay-later history?

Depends on your definition of 'penalized'. FICO is all about identifying good ROI candidates. Say you are a lender, you want someone who constantly uses credit, always pays their bills and has the capacity take on new debt. That's what FICO is for. It's not some consumer reward system. It's not your score to game, it's a score on you for companies to game. Quit playing the game. Credit score NULL.

IMO the game is to get the highest credit score while spending the least on credit. That way if you e.g. need to acquire housing, a reliable vehicle, business loans, even employment or insurance, you will be able to and can get a good deal. Sure, paying nothing saves you money, but it also costs you the opportunity cost between what you could earn/save by utilizing credit vs waiting months to years to save up and pay cash.

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

#323

Post by RankingMember »

nradov wrote: post #311
RankingMember wrote: post #300

Earlier quoted context omitted.

I see this as directly correlated with the gradual denigration of liberal arts education, a core tenet of which is critical thinking.

Liberal arts education leaders haven't been doing themselves any favors. During the recent COVID-19 pandemic we saw many college administrations abandon all critical thinking to enforce blind obedience and mandatory compliance with pointless and counterproductive policies around lockdowns and mandates. Scientists were condemned for daring to even discuss alternative views. I absolutely see value in classical liberal…

I think it's very easy to Monday morning quarterback administrative decisions about COVID-19 mitigation now that we're past it, when, at the time, we had very little information which led to a ton of hysteria. I'm not going to relitigate the COVID-19 pandemic response, but I will say I don't think it was inconsistent or ill-advised at all to err on the side of following national health guidance in an emergent situation like that. Even from a purely legal/lawsuit-aversion standpoint, you'd ignore federal guidance/mandates at your financial peril.

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

#324

Post by kiba »

jvanderbot wrote: post #320
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…

Credit cards however, can be used to get free stuff from rewards. Credit loans or payment plans can also be used to get a higher credit score, making the first item easier. Conversely to your example of credit making cash, Cash can make you money through investing, so Credit can also be used to keep higher amounts of cash on hand when purchases are made. , e.g., buying a car on credit and using the car money to inves…

Credit card rewards are just discounts, discounts that are charged to the merchant. It's not a free lunch by any means.

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

#325

Post by bonoboTP »

parpfish wrote: post #277
bonoboTP wrote: post #148

Earlier quoted context omitted.

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…

There’s also a second order effect of the people using easy loans/credit money leading to higher prices for everybody else. The cheap options will disappear if there’s a big chunk of the population that will go in debt to get the pricier option. Why sell $1 tacos when customers are willing to Klarna an $8 burrito? Why make a school with affordable tuition when students are willing to take out $100k loans?

This definitely happens. It's like giving cheap loans to young couples who are having their first child, which was introduced in Hungary. But without more available housing, the market simply prices it in that suddenly people are able to pay more using this cheap credit, and supply and demand just makes it settle at a higher price.

Credit is basically a loan from the future. Except that's obviously impossible. Time travel doesn't exist, so it's just economic fiction. In the end the math has to add up in terms of real material goods and services right now. People can only reshuffle the goods among themselves, any trade with the future may be a useful fiction to simplify accounting but is obviously just fiction.

This is a bit like saving money for your retirement. It's a fiction. If there aren't enough young people working as nurses to put you in your diapers, then there simply aren't. A pensioner is not using the goods that they made decades ago. Their work dissipated there and then, and now decades later the only value they can consume is the one generated in real time by the actually existing working population.

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

#326

Post by kiba »

bryanlarsen wrote: post #309
ljm wrote: post #294

Earlier quoted context omitted.

Wages for the average person (working class) typically remain stagnant while cost of living increases, particularly through inflation. I imagine minimum wage would be 25-30 bucks an hour if it did track inflation and that would only serve to keep your purchasing power constant. Credit, in this sense, is also used to solve a cash flow problem. It’s a bad sign when that credit (or Klarna Pay-in-3 style setups) is appli…

That's not true. Wages have generally outpaced inflation as long as we've measured inflation properly. Up until the early 1970s this was very palpable, since the early 1970s the delta has been much lower, wage increases have been very slightly above inflation. Why does it feel different? 1: the amount of stuff we buy has increased a lot . Anybody who owns what would be considered solidly middle class in the early 197…

Average American household budgets are dominated by housing, transportation and taxes.

Maybe some of that problem is about spending too much money, but it cannot be denied that housing are unaffordable and that transportation is inefficient and is a mess.

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

#327

Post by thomascountz »

I left the U.S. several years ago and have completely forgotten about "credit scores" in this sense. I get reminded every once-in-a-while how things that used to feel so obvious and inevitable and necessary for society to function are completely artificial.

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

#328

Post by tr81 »

rangestransform wrote: post #262
Forgeties79 wrote: post #201

Earlier quoted context omitted.

It takes a lot of work to be a parent and also monitor all that media consumption/stop all ads. The “average person” isn’t as tech savvy as most of us here and that stuff just doesn’t come as easily to them. For instance I am very comfortable letting my kids play video games. I play a lot myself, I can make good judgments about what is appropriate for them, what is an appropriate amount of time to play, what is good/…

Is it not ok that parents that spend more time and effort with their kids have better outcomes than parents that spend less time? I’d rather that than have the nanny state regulate everything bad for kids out of existence; we already know what kind of civil rights violations politicians try to justify with children.

It is very hard work raising kids if you are interested in parenting and want to do your best.

The thing is that not everyone's life goal is to be the best parent around. And there is pressure from the society/culture/government to reproduce for healthy economy.

If we as a country want people to have more children, then we need to make their job easier. That may include censorship, age verifications, etc.

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

#329

Post by RankingMember »

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.

The problem is some of us have way more weight to throw around than others, so in some cases one of those "people making choices" has as much impact as millions of people.

As a side-note, putting straws in the dishwasher doesn't do a very good job of cleaning the insides of them. Unfortunately, you've gotta faff with those little brushes.

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

#330

Post by BobaFloutist »

ljm wrote: post #294
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"

Wages for the average person (working class) typically remain stagnant while cost of living increases, particularly through inflation. I imagine minimum wage would be 25-30 bucks an hour if it did track inflation and that would only serve to keep your purchasing power constant. Credit, in this sense, is also used to solve a cash flow problem. It’s a bad sign when that credit (or Klarna Pay-in-3 style setups) is appli…

I do wonder if there's hidden benefits to using Klarna to get, like, bulk discounts. Buy three months of toilet paper/chicken broth at once at Costco, pay it off over three months, save a few bucks each time.
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