Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

axios.com

Post reply on HN
Print view View original

131–140 of 690 posts

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

#131

Post by klabb3 »

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.

This. If you’re poor and get money, there are all kinds of people interested in getting a slice, and if you’re a good person, you’ll probably have family members who genuinely could use it for necessities. Govt/creditors can also apply systemic pressure like ”oh you no longer qualify as poor this week, so we’ll take back your benefits”. Well thanks, now I’m poor again.

Employers especially don’t like when people break out of poverty, because as soon as they have a buffer they can make choices and bargain. So there’s a lot of deep pocket incentive to keep people in their place.

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

#132

Post by api »

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.

That's not technically a business, it is a business, and it can be a tough time consuming one. I've known more than one person who sold their investment properties because they were tired of being a landlord, which is a job.

Not saying it can't work. It can. But it's a business and a job/sidehustle not magic free money.

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

#133

Post by jacekm »

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.

I do. Housing prices are constantly rising, when you take a loan you are buying an asset which (with some luck) may appreciate in value more than mortgage interest rates. That's why in some countries it's worth taking a loan as soon as possible without saving for too long.

Sure, without mortgage you may not be able to afford a house at all but it does not change the fact that mortgage is a "good" loan (i.e. you benefit from taking it)

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

#134

Post by klabb3 »

hnbad wrote: post #105
bluecalm wrote: post #92

Earlier quoted context omitted.

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 produc…

You don’t even need an industry to convince you. Eg former Soviet countries were/are notorious for being obsessed with material luxury.

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

#135

Post by burnt-resistor »

UltraSane wrote: post #23
firesteelrain wrote: post #2

Credit scores will tank further

If customers make every payment their score should improve.

That's an incomplete answer because it doesn't take total debt burden and history of payments into account over time. Score is fluid and should decrease while debt burden is high or increases. At the end though, score should improve slightly because they are slightly more trustworthy having repaid what was promised.

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

#136

Post by eadmund »

bitmasher9 wrote: post #57
crazygringo wrote: post #32

Earlier quoted context omitted.

> 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…

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…

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 trouble is if one borrows that $40,000 to buy a brand-new car (which will lose $16,000 over five years), or if one borrows that $40,000 and doesn’t have or doesn’t invest $40,000, or both. Life’s a lot easier if you already have the money.

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

#137

Post by [deleted] »

bitmasher9 wrote: post #64
scarface_74 wrote: post #60

Earlier quoted context omitted.

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.

Im just encouraging people to do the math, and to consider borrowing smaller amounts of money over shorter periods of time.

[deleted]

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

#139

Post by hobs »

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. :)

Read the article and approach, the BNPL is going to be in effect like one credit card opened per transaction.

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

#140

Post by msgodel »

hnbad wrote: post #103
msgodel wrote: post #79

Earlier quoted context omitted.

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…

People need to stop moving out of their parent's house if they can't be stable. That's the root cause of a lot of the problems in the US.
Post reply on HN