Credit Scores Based On AI and Your Social Media Profile Could Usher In New Way For Banks To Discriminate (vice.com) 203
Credit scores have a long history of prejudice. "Most changes in how credit scores are calculated over the years -- including the shift from human assessment to computer calculations, and most recently to artificial intelligence -- have come out of a desire to make the scores more equitable, but credit companies have failed to remove bias, on the basis of race or gender, for example, from their system," writes Rose Eveleth via Motherboard.
While credit companies have tried to reduce bias with machine learning and "alternative credit," which uses data like your sexual orientation or political beliefs that isn't normally included in a credit score to try and get a sense for how trustworthy someone might be, Eveleth says that "introducing this 'non-traditional' information to credit scores runs the risk of making them even more biased than they already are, eroding nearly 150 years of effort to eliminate unfairness in the system." From the report: Biases in AI can affect not just individuals with credit scores, but those without any credit at all as non-traditional data points are used to try and invite new creditors in. There is still a whole swath of people in the United States known as the "unbanked" or "credit invisibles." They have too little credit history to generate a traditional credit score, which makes it challenging for them to get loans, apartments, and sometimes even jobs. According to a 2015 Consumer Financial Protection Bureau study, 45 million Americans fall into the category of credit invisible or unscoreable -- that's almost 20 percent of the adult population. And here again we can see a racial divide: 27 percent of Black and Hispanic adults are credit invisible or unscoreable (PDF), compared to just 16 percent of white adults.
To bring these "invisible" consumers into the credit score fold, companies have proposed alternative credit. FICO recently released FICO XD, which includes payment data from TV or cable accounts, utilities, cell phones, and landlines. Other companies have proposed social media posts, job history, educational history, and even restaurant reviews or business check-ins. Lenders say that alternative data is a benefit to those who have been discriminated against and excluded from banking. No credit? Bad credit? That doesn't mean you're not trustworthy, they say, and we can mine your alternative data and give you a loan anyway. But critics say that alternative data looks a lot like old-school surveillance. Letting a company have access to everything from your phone records to your search history means giving up all kinds of sensitive data in the name of credit. Experts worry that the push to use alternative data might lead, once again, to a situation similar to the subprime mortgage crisis if marginalized communities are offered predatory loans that wind up tanking their credit scores and economic stability.
While credit companies have tried to reduce bias with machine learning and "alternative credit," which uses data like your sexual orientation or political beliefs that isn't normally included in a credit score to try and get a sense for how trustworthy someone might be, Eveleth says that "introducing this 'non-traditional' information to credit scores runs the risk of making them even more biased than they already are, eroding nearly 150 years of effort to eliminate unfairness in the system." From the report: Biases in AI can affect not just individuals with credit scores, but those without any credit at all as non-traditional data points are used to try and invite new creditors in. There is still a whole swath of people in the United States known as the "unbanked" or "credit invisibles." They have too little credit history to generate a traditional credit score, which makes it challenging for them to get loans, apartments, and sometimes even jobs. According to a 2015 Consumer Financial Protection Bureau study, 45 million Americans fall into the category of credit invisible or unscoreable -- that's almost 20 percent of the adult population. And here again we can see a racial divide: 27 percent of Black and Hispanic adults are credit invisible or unscoreable (PDF), compared to just 16 percent of white adults.
To bring these "invisible" consumers into the credit score fold, companies have proposed alternative credit. FICO recently released FICO XD, which includes payment data from TV or cable accounts, utilities, cell phones, and landlines. Other companies have proposed social media posts, job history, educational history, and even restaurant reviews or business check-ins. Lenders say that alternative data is a benefit to those who have been discriminated against and excluded from banking. No credit? Bad credit? That doesn't mean you're not trustworthy, they say, and we can mine your alternative data and give you a loan anyway. But critics say that alternative data looks a lot like old-school surveillance. Letting a company have access to everything from your phone records to your search history means giving up all kinds of sensitive data in the name of credit. Experts worry that the push to use alternative data might lead, once again, to a situation similar to the subprime mortgage crisis if marginalized communities are offered predatory loans that wind up tanking their credit scores and economic stability.
It could happen (Score:1)
It could also be made illegal so that it does not happen. It will never happen in the bought and paid for USA but in sensible countries like the rest of the first world it could be stopped.
We're behind the Chinese (Score:5, Insightful)
Their "social credit" score is far beyond our mere FICO scores. No, I'm not happy about this, but it's obvious that's where we're headed anyway. Just wait ten years.
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Fuck China and fuck apologist idiots like you. Go live there.
And there goes your social credit rating .... ;-)
Banks should discriminate, that is their job (Score:1, Insightful)
I don't get what the problem is around banks figuring out better ways to discern who is a good risk for giving money to, and who is not...
Indeed, this new mechanism described in the summary could well be a lot less prone to problems with racial stereotypes, as an AI looking at your social media profile wouldn't care what color you were, just how people regard you anyhow you treat others, rather than some possibly biased human agent making choices about a loan for you based on perception with few facts about
Re:Banks should discriminate, that is their job (Score:4, Informative)
Indeed, this new mechanism described in the summary could well be a lot less prone to problems with racial stereotypes, as an AI looking at your social media profile wouldn't care what color you were, just how people regard you anyhow you treat others, rather than some possibly biased human agent making choices about a loan for you based on perception with few facts about who you are.
So who programs this AI and what data sets is it trained on? An algorithm powered by weak AI can easily descriminate and have plausible deniability at the same time. The programmers and training sets are reasons why there have been massive descrimination in the past, intentional or not.
Maybe, but how is it not better? (Score:1)
So who programs this AI and what data sets is it trained on?
You can say that about EVERY human lending agent at every bank. Only they are also prone to natural human bias to not trust as much people who seem significantly different than themselves.
If the tables were flipped and it was the AI giving out loans today you would think it was bonkers to give the choice of who gets loans out to a fleet of a hundred thousand randos, each with individual biases and also introducing the possibility of corruption (se
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This was done, very effectively, 20 years ago by the Swift Group in England. They evaluated sub-prime mortgage candidates, very effectively, for the risk of their loans. They were dispassionate. They did not bring racial stereotypes to the table, but judged only on the data. And if the banks of England had used them more widely, they would not have suffered the sub-prime mortage crisis. But the agents were too busy making their quarterly numbers, and reselling the mortgages, to say "slow down!!!! some of th
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I don't get what the problem is around banks figuring out better ways to discern who is a good risk for giving money to, and who is not...
This is the whole "reality is biased" bullshit again. Computers have no bias. If they determine that a certain bit of information is a good signal for making a decision, THAT'S BECAUSE IT IS, NOT BECAUSE THE COMPUTER IS RACIST.
I'm getting so sick and tired of this "we must fix reality to meet our biases, rather than accept certain uncomfortable truths." Computers have no biases. AI have no biases. If they've discovered that they can reliably predict risk based on certain information that just so happens to
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Computer models can be wrongly biased, especially in light of spurious correlation. Vision AI will sometimes think a random image of static is a cat. That being said not every inequality is evidence of bias.
Institutionalize racism (Score:1, Interesting)
First, let's be clear, we're not talking about AI, we're talking about very, very complex co
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The most famous example is when Crack Cocaine carries stiffer penalties than powered cocaine, but there's much less blunt examples.
WTF does this have to do with anything?
You can "redline" black neighborhoods for home loans based on zip code, so that even when a family gets good jobs they still end up segregated because they can't get the kinds of low interest loans needed to move to nicer neighborhoods.
Redlining has been illegal for years. You can't do that any more. It's not a thing.
First, let's be clear, we're not talking about AI, we're talking about very, very complex computer models.
Here, let me quote literally the first line of the summary for you:
most recently to artificial intelligence
We're literally talking about AI.
It's basically why blacks are as badly off as they are when taken as a whole. They were excluded from a good chunk of the New Deal and the social programs of the 60s & 70s.
(checks calendar)
Look at that, it's still the 21st century. What does crap that happened 60 years ago have to do with today?
The bottom line is that these new computer AI models can't have bias because they're based on nothing but math. Unless you want to claim that math itself is somehow b
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The most famous example is when Crack Cocaine carries stiffer penalties than powered cocaine
It's famous and it's wrong. Black leaders supported the stricter crack cocaine laws because they saw what crack was doing to their communities. [wnyc.org]
Um... that still makes it institutionalized racism (Score:2)
Also they were duped by propaganda. It's not the surprising. Especially in the 80s with limited information available and fearmongering running high.
Re: Banks should discriminate, that is their job (Score:2)
Yeehaw - kick the poor!
If banks don't help make the rich richer and the poor poorer, who will?! Long live the class system! Those filthy deplorable proles DESERVE absolutely everything they do to be harder and more expensive! Housing and employment discrimination are the best! Ignore the teachings of Jesus and most other spiritual leaders throughout history - moneylenders are super duper awesome and should be allowed to control every aspect of life!
In summary: I've got mine, so screw you Jack! Fuck you, p
Re: Banks should discriminate, that is their job (Score:2)
Bullshit. Typical self-congratulatory kick the poor rhetoric from an Anonymous Coward.
It's all about income vs expenses. When you earn enough money to pay for a normal life, it's _trivially easy_ to make "good financial decisions". Trivially fucking easy - stop patting yourself on the back. When you don't have enough income for a normal life, making "good" decisions is brutally difficult.
Source: been there, done that, seen both sides.
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I don't get what the problem is around banks figuring out better ways to discern who is a good risk for giving money to, and who is not...
Indeed, this new mechanism described in the summary could well be a lot less prone to problems with racial stereotypes, as an AI looking at your social media profile wouldn't care what color you were, just how people regard you anyhow you treat others, rather than some possibly biased human agent making choices about a loan for you based on perception with few facts about who you are.
Banks cannot just give out money to everyone, or they will collapse. So there has to be SOME way for them to chose who gets lended money. Again, why is a mechanism less prone to human fallibility and individual judgment worse in any way? The new system will also be more even-handed.
The problem is when the mechanisms are accurate, but result in disparate outcomes. People don't like that, we have cultural bugaboos about it, so we have to pretend that they aren't accurate (or that they could be practically more accurate, fallacy of the false alternative).
Incorrect Base (Score:2)
If controlled studies find lending to blacks is very risky
That made no sense, you are essentially saying :
If controlled studies find lending to humans is very risky
It's always a question of subset - some people of any color will be risky to lend to, some will be great risks. It doesn't even necessarily track with socioeconomic status - a poor person who has been very thrifty and intelligent with a great plan could easy come across as an excellent risk.
I would always support banks giving different people of
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The issue is when the "individual factors" are not related to the objective (likelihood to repay credit) but instead are related to membership of a class that has relationship to the objective. For traditional credit scores, they are designed to be very explainable in both the factors used and the calculation of the score. As the data moves further away from being related to the person's finances and as the algorithms become more complex, it becomes much harder, not impossible, but harder, to ensure the res
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So, you apparently missed the spot ...You also haven't been reading up on some of the recent controversy about trained AI routines showing racial biases.
I know about those things, arguments drummed up by people who don't even know how modern AI systems work (I have done some work programming them) and see race issues in every corner where there is none to be found.
I didn't talk about it because the concern is fundamentally stupid, especially in relation to the massive BENEFIT discriminated people would see
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why do you want to drag color back into the equation and move away from the peaceful eventually that Martin Luther King espoused?
Because these virtue signaling fucks are racists. They think minorities are so inferior that they have to protect them.
They fancy themselves the White Savior.
In the end, they are still just racist fucks, with the addition of insecurity about it.
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So how will a lack of social media profile be viewed? Good or bad, or not have no affect.
I don't see why it would not be seen as positive, since in itself it would show much less dependance on expensive electronics.
There is an alas today to people who have no credit history, they can get loans - they are kind of considered middle of the pack I believe.
I've got a great idea for these people (Score:2)
27 percent of Black and Hispanic adults are credit invisible or unscoreable (PDF), compared to just 16 percent of white adults
They should talk to a loan agent of some sort, who could identify these 'unscoreable' [youtu.be] people in the first place. Then they could be given an identifying mark for future reference.
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No, someone needs to explain to the people who are "credit invisible" that IF (small word, big meaning) they wish to establish some reasonable capability to borrow money, they need to, well, borrow some mone
This will usher in a new wave of fake social media (Score:2)
No problems here (Score:5, Informative)
People already use one sanitized and "fake" account for work/business and one for actual use.
Someone willing to put in the work of maintaining a clean account sounds like an excellent credit risk to me. The lazy or inept simply would not bother.
Also good luck actually keeping the two separate with facial recognition tie-ins across all accounts. The link will be outed - if not by yourself, then by the world around you.
Sue For Libel (Score:3)
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Everyone is a credit risk, this is just assigning a score but the risk is 3 way. 1. total loss, 2. part loss 3. no loss.
If you live on the street and have a needle sticking out of your arm then I would put you closer to 1. If you have had a good job for 20years and have your own home mortgage free I would put you closer to 3. I have no proof, only evidence (you may not know the difference.)
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This comment shall be forever archived on the internet, for A.I's to find, tie to your real identity, and then factor in how much risk.such public statements about you.
Deal with it, ignorant twat. I suggest trying to deal with it by suing me for libel, because the A.I's will love to also factor in how frivolous lawsuits about someones credit worthiness is very informative.
Re: Sue For Libel (Score:2)
Correct, under the old & virtuous Common Law, the practice of "credit scoring" would be considered slander. Perhaps racketeering as well. Quite illegal.
However the wicked business practices of the big 3 Social Credit rating companies are exempted from the Common Law by explicit statutory authorization. The statute is euphemistically named the Fair Credit Reporting Act.
Will these upstart Social Credit rating companies be able to comply with the FCRA? Doubtful. Most industry-written laws are intended
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You cannot state that someone is a credit risk without proof.
You cannot state that someone is a good target for lending without proof.
That is what the "credit companies" are offering. The negative of that, which is what you are stating, is not something they are claiming, even if it can be inferred.
It's not bias, it's statistics (Score:1)
If X percent of people who are like Y have bad credit, that's not bias; that's reality.
Let's face it, poor people will have bad credit. Rich people can have bad credit too, it's just less likely. But I'm sure the likelihood of a rich person having bad credit is about the same as a poor person having good credit.
It's bias, it's statistics (Score:2)
What the fuck do you think bias is? X percent of people who Y are Z is a correlation. Unless it's causal at near 100%, what you are doing is being biased assuming Y causes Z. Of course, what you claim to be doing is assessing different likelihood, but that probability turns into a credit score. Your philosophy lets people get their credit scores dinged for being black, or whatever.
This is what machine learning is _for_ (Score:4, Insightful)
> While credit companies have tried to reduce bias with machine learning and "alternative credit,
As politically incorrect as this may be to say, being too young, too old, black, female, transgender, or medically disabled are all tangible proof of increased credit risk. Being born healthy, Jewish or Asian, male, young, and with a wealthy family all are tangible proof of reduced credit risk. They may also each be individually or collectively illegal to discriminate on the basis of, but they are all _tangible credit risks_.
Banks, landlords, schools, and many other businesses are heavily regulated to present discrimination, but many forms make powerful and effective business sense. Even simple correlations, such as the likelihood of single motherhood, are factors not allowed for discrimination but likely to devastate the finances of a loan applicant. So there is no surprise, and should be no surprise, that lenders would seek information to reduce their risks even if it is tied to factors that are illegal to discriminate with.
Re: This is what machine learning is _for_ (Score:3)
Perhaps it's time we the people ask, which do we value more: moneylenders' profits, or macrosocial cohesion?
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Or we could ask "do we really want anyone lending to anyone else?" Because if a lender can't legally make a decision like "a single mother is more likely to default on a loan than a married couple (of whatever ethnic or otherwise protected group)", then the obvious solution is to either:
a) stop lending money altogether, which hurts everyone (but especially the poor), or
b) raise interest rates acr
Re: This is what machine learning is _for_ (Score:2)
"stop lending money altogether, which hurts everyone (but especially the poor)"
Naw, brohamley. Outlawing usury would be immensely beneficial for the poor and the working class. Not only would the people be relieved of the parasites sucking their blood every month - but also, the cost of houses would drop like a rock.
It's always the rich - including the sovereign - who benefit from moneylending. It's always the toiling masses who pay for that benefit in blood, sweat, and tears.
Could be problematic due to NN superstition (Score:5, Interesting)
Neural networks develop superstitions (just like people do) by correlating unrelated coincidences in information. If they apply NNs to social media data, it could develop superstitions as silly as someone not having a picture of their car or as racist as the color of your skin. The real problem with NNs is that they don't know the what is being used to determine if someone is a higher or lower risk. My real concern is that not having a social media account will default to believing you are high risk.
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Neural networks develop superstitions (just like people do)
I don't. I've got a lucky charm to prevent it.
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AI should not be treated as a black box. In most cases it isn't, there are known inputs and different sub-AIs to process them, e.g. the AI module that handles object recognition in photos will be different from the one that handles loan repayment history data. The outputs of all those are then weighted and combined, and all that information can be recorded and presented on request.
Make it a legal requirement for people to know how and why decisions about them were made (as it is under GDPR) and it will be n
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Make it a legal requirement for people to know how and why decisions about them were made (as it is under GDPR) and it will be near impossible for companies to hide biases inside AI black boxes.
Sounds great. How do you plan on getting Republicans on board? Just sayin'.
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I think you will have to wait until the Democrats control enough of the government to force it through.
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I think you are right that correlation can be a problem, but I don't think superstition is the right metaphor. Machine learning will latch onto correlations between the features and the label, but it will still have high accuracy. The problem is that this correlation might only exist in this data. Now machine learning is not dumb enough to just use any correlation found in the training data.
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AI should not be treated as a black box. In most cases it isn't,
Sure, other than the self-learning/machine learning ones. Those that learn on big sets of data are not human readable. The box is inherently black by nature. You can't open it up and deduce why the weight on node201 is 0.12412352. The AI itself certainly doesn't know why any more than you can explain what your 293,395th neuron does. The reason it's at that value is because it was better at identifying who to give loans to. For that given data set. And a healthy dose of rand() thrown in for good measure.
The
complaining (Score:2)
1. A big bank account and a good credit and employment history that shows you can pay it back. This is basically your standard credit score.
or
2. Give enough personal info that tells another person that you're honorable and reliable. Give up this much info, it's gonna feel like you just submitted to big brother. You're not gonna like giving up that much info.
"Unbanked"? (Score:4, Interesting)
Re: "Unbanked"? (Score:2)
Agreed, in our totalitarian-financialist society it apparently basically impossible to live indoors without a bank account.
However Federal Reserve statics as cited by Wikipedia (https://en.wikipedia.org/wiki/Unbanked) claim that unbanked unpeople are 7.7% percent of Americans. The percentage of unpeople rises above 20% in some locales.
I really don't know how those unpeople survive. But I must suppose they get exposed to the sharp pointy parts of the financialist machine more than we do.
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But given that all you need to open an account is money, it's really just a matter of getting a paycheck and taking it to a bank instead of paying extra to cash it at a check cashing place.
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How does an "unbanked" person pay apartment rent every month? [...] pay the utility bills? Make an online purchase?
The answer, in my experience, is that they pay more than the rest of us to do those things.
Yes, there are prepaid debit cards and alternative banking businesses that will issue you a debit card. I live near Dallas, TX now; apartment complexes here almost always charge a percentage fee if you pay rent with a card. I've yet to see an apartment complex that accepts cash. So, yes, if you can't pay by check or bank draft, you can load the money onto a debit card (which may involve a fee) and pay your rent that w
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Banks share a blacklist of people who have overdrawn accounts. It is quite possible to be blacklisted from getting an account at most banks.
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Maybe it's because I've had at least one checking account since I was 17 (when I got my first job)"
I live in a country where no-one can be "unbanked" except by their own volition. There are zero fee bank accounts that have to be offered under government regulations. Of course these accounts are also very low feature, most are just a card but even someone who has been convicted of multiple counts of bank fraud can get a basic bank account here in the UK, albeit a very thoroughly monitored one.
but I have never been able to wrap my brain around how/why someone can function in a modern society being "unbanked" without a traditional bank or credit union account.
Having any unbanked except by their own volition (I.E. paranoid crackpots) usually indicates that a society either
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It's been a while since I've had to rent, but most places will also take money orders, which you can get with cash.
Of course, if you don't have a bank account and get the money order at your bank, getting the money order will cost you a fee, so really it's just another way people too poor to function "normally" end up having to pay more.
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You have never been truly poor. Here is how I know:
Rent: Money Order(s)
Utilities: Money Order or some supermarkets accept payments at their Customer Service counter
Online Purchase: Visa gift card or give a friend some money and have them order it for you
There are ways to do everything with cold hard cash
Being poor is a form of torture with how society is set up. I am sure that result is intentional to "encourage" compliance. :(
The unsolvable "problem" (Score:4, Insightful)
The unsolvable "problem" is that different groups have different average characteristics and outcomes in various areas of life.
You can argue about what the reasons for that are - I'd hate to go all "anti-science" and claim that brains are biological or anything - but regardless of why, it's a fact. A fact that isn't due to "racism" so it will not be budged by changes in "racism".
It can only be budged by engaging in racist policies of putting your finger on the scale to change the outcomes.
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The unsolvable "problem" is that different groups have different average characteristics and outcomes in various areas of life.
This isn't actually a "problem", just a fact - so long as you only deal with the average across the whole group.
A problem only arises if you use that average to make decisions/assumptions about a specific individual member of that group.
Since when is bill payment not included? (Score:2)
So same thing then? (Score:2)
Credit scores are a biased idea (Score:2)
The whole idea of credit scores is to introduce bias into the system of giving loans. They don't want to give loans fairly or evenly - they want to weed out anyone who is not going to pay or is not going to make them money. If you want the result to be biased, you're going to have to introduce data that is also biased (though maybe in unintended ways). The thing is, it doesn't really do much good to look at biases over groups of people (however you group them), because the system is unfair on an indivi
Tested in China...used in the USA (Score:2)
vote the way we tell you (Score:2)
or we forclose on your house and good luck renting after we destroy your social media score. This is Groupthink on steroids. Someone needs to blow up the establishment before it gets off the ground.
Re:Credit Scores are Bullshit (Score:5, Informative)
Bullshit. I have zero debt and never pay any interest on my credit card bills, yet my score is near the top.
But don't take my word for it, Read what Experian has to say [experian.com].
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FACTS: My credit scores got dinged around 80 points for paying off my student loans 5 years early.
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FACTS: My credit scores got dinged around 80 points for paying off my student loans 5 years early.
I've never heard of mortgages or auto loans like that. If they exist at all, they are easily avoided.
Credit scores have nothing to do with interest payments or how profitable you are, they're a measure of your risk. Interest rates are higher with poor credit scores, paying more inter does not improve your score.
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"but either way you're changing your credit load which affects your score."
Actually that is how revolving credit works not fixed interest loans. The notable exception that burned me was a HELOC for home improvements. Like a regular fixed interest secured loan for property the line is highly utilized because it will always by definition be highly utilized. At some point a HELOC rolls into a mortgage and it is always backed by assets so it should always be reported as a mortgage IMHO. I had to open additional
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If you oldest account suddenly drops off, that will be a ding. They want to see at least some sort of active credit.
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Yes but isn't for closing that account specifically it is because it will reduce the average age of active accounts which is a metric they are using to compute your score.
Re: Credit Scores are Bullshit (Score:4, Interesting)
Getting his credit score dinged was not a "penalty" for an early payoff. It was a penalty for being someone who pays off loans early. When you do that, the loaner loses out on the interest he was expecting to make, and her business becomes less predictable. They want people who are going to march along like nice little sheep and pay the interest on the money they rented instead of moving out early.
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"and majorly rebalancing your credit load DOES affect your score, either way."
Again, you are thinking of revolving credit which a mortgage is not.
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"and haven't carried a large balance"
This bit is sort of a myth. Having too high of utilization can hurt you but the size of the balance doesn't matter as long as the account is in good standing. At least directly, indirectly the card company will sometimes reduce your limit if you don't utilize the card but usually not if you at least use the card regularly.
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"Why would you do that? Pay it off 95% of the way, and throw a dollar (or whatever the minimum payment is) per month at it: "forever"."
Because those minimum payments are normally like $30 if you are doing that on a handful of credit cards it is a car payment? When the balance gets low a fixed minimum kicks in.
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This is just like closing an old credit card account. Why would you do that?
You do sometimes get dinged for having "too many" credit cards.
Comment removed (Score:4, Insightful)
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"not your ex or current wife"
That is interesting since financially speaking a husband and wife are one collective pot of income and debt.
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Maybe I'm wrong, but I thought that once you are issued a credit card, use the card, pay off the card, then your credit score is established at that point. So if you have a credit card, and pay it off each month, mixed with zero debt, then that's how you have a good credit score.
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Yeah but I guarantee that isn't the result of normal uninformed behavior. I have a high score as well, the biggest factor was learning about how credit scoring works and then adjusting my use of credit to align.
Undoubtedly you have cards, make purchases on them, then pay those purchases off since you only made them to keep them alive. Possibly you also get rewards/miles though if you don't use it for business I doubt it actually adds up to be enough to be worth the effort. That is manipulating the credit sc
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Making purchases and paying purchases off IS establishing that you are a good credit risk. The credit scoring companies have spent decades making it so that the only ways to "game" the system are to establish that you're a good credit risk. Yes, theoretically you could do this for a while, then get a mortgage and auto loan and charge up all the cards to the max and default on everything, but statistically people don't.
Of course you should never have gotten a card with a high annual fee in the first place.
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"but each run all daily expenses through a monthly paid off card and have 830s or so"
Which is basically a hack because this is the reason you have a good score and yet says nothing about your ability to handle credit if you needed it. That's the point, having a high score is about understanding how credit scoring works instead of how well you manage debt.
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"but each run all daily expenses through a monthly paid off card and have 830s or so"
Which is basically a hack because this is the reason you have a good score and yet says nothing about your ability to handle credit if you needed it. That's the point, having a high score is about understanding how credit scoring works instead of how well you manage debt.
What it means is that he's good at paying off his debts. For instance, not getting into debt, or paying off that debt quickly. So he's "likely" to be a lower-risk borrower, which is what a credit score is supposed to reflect, since he pays his bills. Folks who miss payments, they're more likely to miss payments in the future, and that may be a sign they're already overtaxed. That's a credit risk. Also, since he's not currently in debt, he's probably capable of taking on debt. Folks who are already carrying
Re:Credit Scores are Bullshit (Score:5, Interesting)
They have nothing to do with measuring your ability to pay back a loan.
They are not designed to measure your ability to pay, but your likelihood of actually doing so.
Plenty of people default on loans, not because they can't pay, but because they spend their money on other things.
Many people, even with high incomes, have an astounding inability to manage their finances.
Credit scores reflect the fact that people who don't pay their utility bills are also unlikely to pay their mortgage.
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There also appears to be a correlation between credit scores and your likelihood of filing an automobile accident claim. So credit scores can have an effect on your insurance rates.
Why there is a link seems up to debate. Maybe those who take more risks with finances also take more risks in other areas. Maybe poverty just makes you dumber [reuters.com] and dumb people get into more accidents. Maybe t
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It also may be that people who pay bills on time generally set aside a reserve in their bank accounts. Having that reserve may make it more likely to pay out of pocket for a fender bender rather than filing a claim and driving up insurance. We've done that twice on fender benders that were just slightly higher to repair than the deductible.
Re: Credit Scores are Bullshit (Score:5, Informative)
A credit score is your history of repaying loans.
If you repay them you score higher. If you pay them off early you score even higher.
Your credit limit is based on your income. Low income people can't get high value loans.beacuse the risk of them not paying it back goes up. Not paying back loans also lowers your limit.
I know a girl who in three years went from 600 to 820. Credit score. How? She dedicated herself to paying off all her debts, kept them paid down and early, living within her means.
At the same time she also bought a house worth 3 times her old house. Refinanced student loans to lower rates etc.
The trick is instead of drinking shopping or other vices she paid back debts.
The last time I bought a new car my credit score went up 20 points. Taking me to briefly to 830.
As I was under utilizing credit I had.
Both of our incomes are under $60k a year. Proper budgeting allows both fun, and living in control of debt.
Re: (Score:2)
A credit score is your history of repaying loans.
It includes your loan history -- but is not based entirely off your payment history, this is one component of many that contribute to your FICO
If you repay them you score higher. If you pay them off early you score even higher.
Incorrect, FICO scores are calculated by a number of things, including your average account balance, total utilization, and account length. So paying off loans early can hurt your credit score, especially if it lowers your average account length
Your credit limit is based on your income.
Wrong again. Income has no bearing on your credit worthiness. Your ability to repay contributes to your credit worthiness. Y
Re: (Score:3)
You are the one lying (though probably unknowingly) - if it truly lowers (who can say with an AC what is real, what is fantasy) - again, if it lowered it could have been because you had few other accounts to score and so you overall score was a bit lower as it lacked enough info to give a higher rating.
It had absolutely zero to do with your interest payments no longer going to "teh greedily bankssss"
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They have nothing to do with measuring your ability to pay back a loan.
Cough, Bullshit. Of course they do.
When you apply to take out a loan or open up a line of credit --- you supply information on the application. In addition to your ID, they will ask for Income, and/or Whether you rent, the value of other property, etc.
The information on your application such as your Income establishes your ability to pay.
The credit report and credit score are taken to help Verify information you supplied. And th
Re: (Score:3)
My last payment of any kind of interest was with my car and that was paid off over eight years ago.
The trick to good credit rating is to make your payment as you agreed to or in other ways pay back your loans.
Re: Credit Scores are Bullshit (Score:4, Insightful)
The only right class that really seems to help alot is having a mother and father that push a work ethic, push reading and require education. Take away any of those and you start to get harder.
Re: (Score:3)
If I had to hazard a guess, I'd say these credit score enhancement schemes (everything from driving records to home addresses, and now social media) are mostly meant to create new ways to drive up average rates of interest charged on loans.
The credit reporting system is probably good enough as is that it has enabled a lot of non-traditional lenders with access to non-traditional capital sources (private equity, etc) to put more money into the credit system, increasing competition and driving down average in
Re: (Score:2)
That doesn't make them bullshit. That makes them "not meant for you".
The Credit Score is a measure of how much it is worth to a lender to do business with you/how much of a sucker you are. From the bank's perspective, that is the only number they really care about. It's not like they are your friend, or even know you.
Re: (Score:2)
Two words : Credit unions. Fuck social media and fuck banks.
Until you need money while on an offshore vacation, or need to do anything more complex than stacking money locally.
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Re:Banks are the devil by trade. (Score:5, Informative)
Credit Unions frequently (meaning many of them) have Visa or Mastercard or what-have-you debit cards that use those credit card systems for transactions. I had no trouble pulling out money in England when I went overseas for a few weeks.
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I had not problem using my Credit Union issued Visa card. Well, at least not after I called them to inform them that I was overseas. They've got this security thing in place.
Re: Banks are the devil by trade. (Score:2)
One word: palintokia
Re: (Score:2)
That's correct. Credit scores are somewhat racially biased in effect... in favor of black people.