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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

#271

Post by barchar »

candiddevmike wrote: post #24
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…

For a lot of folks, 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. Almost none of these people have the kind of collateral needed to use credit to truly transform their lives, and the government assistance for that is seriously lacking in the US (SBA loans are terrible, and you need enough money to cover your own salary un…

You need money to cover your expenses. Forgoing the rest of your salary is a very, very cheap form of leverage.

For the risk to make sense you probably do already need enough, though.

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

#272

Post by [deleted] »

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…

[deleted]

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

#273

Post by potato3732842 »

ta1243 wrote: post #239
eadmund wrote: post #125

Earlier quoted context omitted.

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).

If you buy a house for 500k on a 5% mortgage over 25 years when you are 25, and you plan to live until you are 85, you will live there for 60 years. It will cost you 35k a year for 25 years, or 875k a year After 25 years you have no more expenses. If instead you rent it for 20k a year, increasing with 2% inflation each year, by year 25 you're paying 33k a year in rent, and by year 60 you're paying 66k a year. Over 60…

>After 25 years you have no more expenses.

After 25-50yr (depending a lot on macroeconomic factors and your specific municipality) property taxes will likely be comparable to your mortgage payment.

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

#274

Post by JKCalhoun »

andruby wrote: post #264
RHSeeger wrote: post #158

Earlier quoted context omitted.

> Housing prices are constantly rising Housing prices are _generally_ rising. It's entirely possible to buy a house and wind up selling it later, having lost money in it. Many times through no real fault.

I hope most people haven't forgotten about 2008 financial crisis and how it was caused by declining housing prices (and the banks/markets not taking that risk into account)

We do. And we remember the rebound some years later and are still kicking ourselves for having not scooped up real estate fire-sales in Las Vegas.

I mean, hypothetically. Some people. Might be kicking themselves.

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

#275

Post by mattmaroon »

jaxn wrote: post #253
Hilift wrote: post #224

Earlier quoted context omitted.

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…

Yeah, paying $10k off your home loan makes your credit score go up if it isn’t closing the loan.

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

#276

Post by JKCalhoun »

gwbas1c wrote: post #231
jacekm wrote: post #133

Earlier quoted context omitted.

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 benef…

> Housing prices are constantly rising Housing prices typically appreciate up with inflation over the long run, although local markets don't always follow the same pattern. (IE, Silicon Valley is a case where real estate appreciated faster than inflation.) Remember, it's over the long run. There can be periods where a house will appreciate faster than inflation, and other periods where the real value of a house doesn…

Since the not-yet-homeowner is no doubt paying rent, home appreciation can slip by some measure below the rate of inflation and still have been a wise investment.

Of course there is home insurance and repairs to consider. But also there is the increase in rent to consider on the other side as well.

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

#277

Post by parpfish »

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…

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?

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

#278

Post by hansvm »

devmor wrote: post #255
mathgeek wrote: post #97

Earlier quoted context omitted.

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 st…

Why'd that suck so much? As a software dev couldn't you just pay it off a month or two later?

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

#279

Post by skeeter2020 »

beowulfey wrote: post #270
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…

People aren't going to learn to be skeptical or think critically because we've been literally removing that from the curriculum in schools. How can someone be skeptical of something if they don't even know how to be skeptical? Social media runs rampant with a form of skepticism, but I would call that closer to paranoia than critical thinking, and I don't think it's really being helpful in the same way.

>> Social media runs rampant with a form of skepticism, but I would call that closer to paranoia than critical thinking

For my generation this was always refered to as a "healthy skepticism", but lately I've noticed many don't necessarily see this as a good trait - an example: any sort of measured, full-picture response to the impact of AI on software development.

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

#280

Post by JKCalhoun »

jltsiren wrote: post #130
leereeves wrote: post #120

Earlier quoted context omitted.

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 essenti…

You can believe that if you like of course, but I am definitely not teaching my children that.

Renting cheaper than owning sounds like a very short-term view.

My dad explained to me the nice thing about a 30 year fixed mortgage in simple terms: 10, 20, up to 30 years later ... your "rent" is the same.

It's a simple experiment to see what a person's rent was going for 30 years ago in your community and then see what a person with a typical 30-year mortgage would have paid each month 30 years ago. Because one of those two is still paying the same monthly amount today and about to have an asset they can pass along to their kids or spouse (or cash-out if they want to retire to live in a trailer in Eloy, Arizona).

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