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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

#371

Post by BenjiWiebe »

anajskkdbf wrote: post #229
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…

> 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.

And yet, the banker truly gives me value if I wish to start a business, or upgrade an existing one, and I don't have the capital to do so. I need money to make money, and am willing to pay for the privilege of using someone else's money.

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

#372

Post by nradov »

ch4s3 wrote: post #333
parpfish wrote: post #304

Earlier quoted context omitted.

Just because that’s what a scores is designed to do it doesn’t mean that’s what businesses use it for downstream. The fact people always debate what a credit score really means suggests that there are too many factors rolled up into a single number when we should really have a few distinct sub-scales. Anybody that has made a dashboard for a ceo with a short attention span that refuses to deal with nuance and just wan…

I agree in general, but a credit score absolutely DOES NOT tell you how profitable someone is to lend to, and in general someone with a very high credit score is a very low margin customer.

And that's where interest rates come in. Lenders will typically make similar profit margins on all types of customers regardless of credit score. They charge lower interest rates to borrowers with high credit scores so it all evens out when averaged over a large customer base. Most lending markets are highly competitive so any major differences quickly get arbitraged away.

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

#373

Post by 9rx »

potato3732842 wrote: post #346
9rx wrote: post #336

Earlier quoted context omitted.

> Average American household budgets are dominated by [...] transportation Huh? Doesn't the average American live in a city? The whole reason for accepting being squeezed in tightly with other people is so that you don't have to worry about transportation; enabling everything you could ever want and need to be found in short walking distance. Transportation is for people in rural areas. Yes, it is expensive, but that…

You've been mislead by an overloaded term. Urban in an academic context is a much lower bar than urban in a "any reasonably layman's meaning of the word" context. Pretty much any time you hear "city" or "urban" it's either a direct or indirect reference to US census data (or follow on research by other academics that uses their definitions) which play fast and loose with the word urban in a way that results in the po…

> Urban in an academic context is a much lower bar than urban

I said city, not urban, trying to portray a high density, well populated area. I fully recognize that the US considers a community as small as 2,000 people to be urban. And, similarly, you need as few as 1,000 people in an area in my country to fall into what is considered urban. This is all well known and understood.

That said, the 3,000 people strong town I live in has everything you need in walking distance, so the point still stands even for small urban too. But it remains that average American lives in larger, more dense communities than that, so the idea of needing transportation is quite strange and defeats the purpose of the density.

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

#374

Post by vel0city »

9rx wrote: post #336
kiba wrote: post #326

Earlier quoted context omitted.

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.

> Average American household budgets are dominated by [...] transportation Huh? Doesn't the average American live in a city? The whole reason for accepting being squeezed in tightly with other people is so that you don't have to worry about transportation; enabling everything you could ever want and need to be found in short walking distance. Transportation is for people in rural areas. Yes, it is expensive, but that…

This is an "urban" home in a "city" of nearly 40,000 residents. Good luck telling this family they don't need to worry about paying for at least one automobile.

https://maps.app.goo.gl/niLDDJkrkYJ1Hh4J7

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

#375

Post by nradov »

hopelite wrote: post #163
NewJazz wrote: post #5

Earlier quoted context omitted.

It already shows up when mortgage lenders do their checks, AIUI.

The irony is that it does not even really matter anymore at this stage, especially with mortgages. So you get a few points taken off because you have 800 vs 600 score, but it won’t really make a difference when both are on the same out of control roller coasters where house prices have increased by 100% in 7 years.

US home prices haven't increased by 100% in 7 years. On a national basis, the Case-Shiller index has only increased by 65% (nominal dollars, not inflation adjusted).

https://fred.stlouisfed.org/series/CSUSHPINSA

In the short term, the difference in mortgage interest rates between prime versus subprime loans can have a major impact on borrower cashflow and the type of property they can afford.

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

#376

Post by bluGill »

JKCalhoun wrote: post #276
gwbas1c wrote: post #231

Earlier quoted context omitted.

> 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.

Depends on how long the not yet homeowener will live there. If you live in the same house for the next 40 years you are almost certainly better off owning it. However if you have to move after a year (which might not be in your control) you probably will lose money. 7 years is a good rule of thumb for minimum time you need to live in a house before it is better than renting, but exact circumstances can be very different.

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

#377

Post by 9rx »

smelendez wrote: post #343
9rx wrote: post #336

Earlier quoted context omitted.

> Average American household budgets are dominated by [...] transportation Huh? Doesn't the average American live in a city? The whole reason for accepting being squeezed in tightly with other people is so that you don't have to worry about transportation; enabling everything you could ever want and need to be found in short walking distance. Transportation is for people in rural areas. Yes, it is expensive, but that…

Most American urban areas are dominated by suburbs where it’s not practical to walk everywhere and public transit is very limited. So a car is necessary and often a car per working adult.

Yes, but why would anyone want to live on what is effectively a farm, but without the benefit of separation from other people or land (read: income) that a farm offers? That completely defies the whole reason for the density. I'm not saying it doesn't exist, I question why people are doing it.

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

#378

Post by pmalynin »

lesuorac wrote: post #249
ta1243 wrote: post #239

Earlier quoted context omitted.

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…

> You'd have to invest the savings and get way higher than inflation returns to break even. You say that like it's a difficult thing to do. S&P500 is up 710% since 1996. Gold is up 92% since 2012. Personally, the rent control is the best part of a mortgage and even though renting is typically better, I'm fine paying a premium for that. That said, good luck getting somebody to loan you 900k so you can play the stock m…

If you put around 200-300k into IBKR (not affiliated) you can get portfolio margin which will give you just shy of $2,000,000 in buying power. Access to leverage isn’t really an issue, but forced liquidation definitely is. The bank will not liquidate your mortgage if you end up underwater.

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

#379

Post by bluGill »

crazygringo wrote: post #80
Jcampuzano2 wrote: post #51

Earlier quoted context omitted.

If you're using credit to buy a car, most people do so in order to get to and from their place of work for the majority of their driving time. In that way, using credit to buy a car still fits into their theoretical model. For example I know plenty of people who completely got rid of their cars when remote work became more common, or at the very least consolidated to smaller cars or to less cars for a family. Similar…

No. You can rent and you can take the bus. Or rent and buy a crazy cheap old used car. A house and a decent car are not primarily about making money. They're about your quality of life. > And all recommend not using credit cards and instead an emergency fund if you lose your job. And if you already used your emergency fund on, say, a medical emergency...?

The odds of two emergencies are low enough that you can ignore this. Not that it doesn't happen, but it isn't that common. If you expect two emergencies you should have more in the fund to cover it.

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

#380

Post by [deleted] »

nradov wrote: post #337
RankingMember wrote: post #323

Earlier quoted context omitted.

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 situati…

You're really missing the point. Many liberal arts college administrations went far beyond any sort of federal government guidance, and imposed lockdown and mandate policies with zero scientific basis. Or look how the Stanford University administration and fellow academics treated Dr. Jay Bhattacharya; that story was repeated at colleges all over the country. The level of hypocrisy and inconsistency makes it clear th…

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