Just the other day, I tried to sign up for a monthly rolling account with Sky TV so that I could watch The Last Of Us. About 20 minutes after I signed up, they cancelled my account due to a failed non-credit "identity check" with Experian. They won't tell me any information about what the issue is due to "data protection" other than to say there's nothing that I or anyone else can do.
My credit report looks fine but I'm guessing there's some incorrect data floating around somewhere, but I don't even know where to start in figuring out what's wrong since nobody will even discuss it with me.
The last time I went to rent a vehicle I got denied due to my credit (lack of, I pay cash for everything so have nothing on my credit reports).
This despite the fact that I had been renting from this _same exact place_ for years prior. I was so enraged by this I said fuck it and went and purchased the vehicle (with cash) I was planning on renting and it will be a cold day in hell before I ever rent a vehicle again. How many industries are so anti-consumer and still in business?
In many ways, covid has emboldened a lot of companies to behave in shitty ways.
There's a lot of incorrect data floating around, but then again, that's not really a problem limited to Experian (I've seen it with all credit reporting agencies), and it's not even limited to private entities. I would even say that it's less of a concern when it comes to the ramifications. About 15 years ago the police showed up at my parents' house looking for "me", and as it was a Friday evening, it took until Tuesday before it transpired, after my mother went to the courthouse in befuddlement, that due to a clerical error of some sort, somehow the LA Sheriff's Office looking to serve a failure to appear warrant on someone whose name is similar to mine but otherwise did not match my age, SSN, or anything else ended up getting served to me, and out of sheer dumb luck it happened during winter break, whereas 49 out of 52 weeks of the year I'd be 3000 miles away at school or 6000 miles away doing fieldwork. The confusion was already apparent by Monday because I spent the whole day in a holding cell with 30 other people at the courthouse and was promptly shuttled back to the Twin Towers jail with zero explanation, and it took literally Tuesday night around 11:30pm, after 3 hours of sitting on a bench, handcuffed, in silence for no discernable reason except that they can. In the interim, I did not have access to medication that I needed and quickly fell into medical distress that was entirely ignored. Luckily I didn't have a seizure, but that easily could have happened. A little bit of due diligence would have prevented this, and if I had a seizure the lawyers I consulted at the time said that I may be able to bring a claim against the sheriffs, but since I didn't, it didn't matter.
Except that I did end up going to law school, and during my internships, which was extensive (your local public defender's office can absolutely use a law student who is tech/code literate, and attorneys and judges absolutely notice when you appear every afternoon if you treat the whole endeavor as less grad school but more trade school), it turned out that data error of some sort that resulted in some sort of loss of liberty, however temporary, is common enough that I'd say between 1-2% of bond hearings involved a case of mistaken identity. Bond hearing is the first opportunity for the defendant to face a judge and while the percentage is obviously low, misdemeanor bond hearing dockets are cattle-calls and a public defender and intern would be sorting and prepping between 30 to 100 individuals (higher after holiday weekends) usually in the span of 2 hours, every single day the court is in session. I didn't go to law school in CA and the demographics are pretty dissimilar, but the sort of error and the ramifications are striking in similarity. It adds up pretty quickly.
Then leveraging my experience and language skills, I ended up moving into immigration removal defense at a private firm a few years later and as it turned out, ICE had data errors that, at least during the mid-Obama years, was even more prevalent, except immigration enforcement is administrative law, not criminal law, and federal administrative law, by virtue of its non-inclusion in the Constitution (who knew Jefferson and Madison could not literally see into the future, eh?), allowed for far more shenanigans with far fewer tangible consequences and most importantly, no entitlement to counsel except very narrow and exceptional circumstances, and in 1 circuit only (9th Cir, cases where the detained had severe mental disabilities). And then I began to see cases of US citizens, who are not subject to immigration enforcement, getting detained on administrative grounds and unable to get themselves out of the situation because administrative agencies almost never act in the capacity that places someone in non-judicial detention, except immigration enforcement (ICE/CBP, basically). Since it was not a judicial matter, there's no allegation of a crime, and without protections afforded by the Constitution or access to counsel, ICE was removing US citizens who had paperwork (that they would regard as false) and an abbreviated version of due process in immigration "court". I still don't know how they determine where to remove US citizens to, since some are native-born and some derived their citizenship from parentage, both requiring no paperwork since it doesn't involve naturalization. The US does not have a national ID system that is mandatory (non-citizens can get SSNs of course and many Americans do not have passports, and almost nobody routinely carries their birth certificate on them, which ICE routinely ignores anyway even if you manage to produce one). Immigration court proceedings do catch a number of erroneous detention cases, but we really can only rely on limited datasets to determine how many US citizens get removed to god-knows-where. Generally you'd have to make it back into the country to even make your case known to attorneys. Catholic Charities is probably the largest immigration legal service provider in terms of size and scale in this country by virtue of them being present just about everywhere and colleagues there sharing anectodal experience say that the number is "higher than anybody should be comfortable with", but there's so little transparency or accountability that the only thing that's certain is that it happens often enough that if you practice in this niche it's likely that you'll see cases, and there's very little that could be done to hold the agency accountable.
Oh, and somehow my erroneous arrest ended up requiring me to explain to the state bar even though it is not linked to any actual case since it was an actual case of mistaken identity/lack of due diligence. It might still be in the system somewhere. Although it doesn't affect me today in any meaningful way, thanks to the kafkaesque system we have, having even an erroneous record of jumping an NYC turnstile, and afaik only an NYC turnstile (unless there's a subway system elsewhere in NY state), is sufficient for a legal non-citizen to face removal proceedings, thanks to careless wording and judicial deference and intentional congressional vagueness in statutory wording and New York State's shambolic legislative system unable or willing to alter the otherwise inconsequential nomenclature of the law. Small data errors can and have literally led to the upending of lives. I guess when there's a potential Sword of Damocles hanging over just about everyone, it's almost comforting to know that most of the time database errors only lead to small inconveniences in the grand scheme of things.
I've worked on the data feeds for TWN in a large company's payroll system. If I remember right they don't just get how much money you made but the line by line check level data. Your pay data probably goes out to 14 different vendors on any given pay period.
What amaze me about payroll was how accurate the data was on average, despite having wild amounts of new regulatory, healthcare, union, and pay program complexity. A surprising amount of money is directed by some lady in a payroll department making $40k with vlookup and 30 excel files on their desktop.
But there sure are some dark messy corners of data quality in people's pay and benefits.
The final act of the dystopic digital transition we are witnessing is when the (until recently ringfenced) information flows of the broader financial system start getting commingled with the other digital activity already being collected and monitored. With the headlong rush to eliminate physical cash soon there will be no opt-out whatsoever.
As the world of old oligopolies dies and a worse one emerges, the grotesque and frightening outline of a handful mega-digi-corps that are the defacto rulers of the brave new world is already visible.
There must be some escape hatch from this nightmare, some red lever behind a glass encasing with a label "break and pull when your society is in existential danger". But I don't see it.
I think people underestimate the importance of physical cash. It’s annoying, sure, but it affords a type of freedom that won’t be replaced once lost. I wish more people understood this. Sadly, most people seem willing to trade a tiny bit of convenience today for a worse future tomorrow—for example, the tipless, cash-only coffee shop on the HN front page. I guess, like smokers, people don’t believe there’ll be consequences until it’s too late.
>>I guess, like smokers, people don’t believe there’ll be consequences until it’s too late.
I wonder with this comment is irony or not? So let me ask, did you support the banning of smoking by government there by denying people the right to body autonomy, deny business the right to control their property, and deny consumers the right to choose for themselves the types of business they transact with? (aka freedom of association) all under the mantra of "the greater good"
Because if you support that infringement upon liberty then it is indeed ironic for you to then use smokers as a prop to talk about further governmental infringement to liberty
I think all they were saying with that is that the long term consequences of smoking is often a problem that isn't apparent until it's too late, which is very much true, but it seems some jimmies were rustled.
The best analogy i've heard for digital currency is not that digital currency is the automobile to cash's horse drawn carriage, but that cash is a bicycle. both can (and should) co exist. the low tech cash is a better solution for many problems, and people without access to digital currency, but it risks being displaced by lobbyists and needs to be protected by the efforts of private citizens.
what I find baffling is that supposedly enlightened societies like Sweden are at the forefront of this cashless "revolution". Maybe they are simply overconfident / delusional about their ability to control the risks of the digital age or maybe the progressiveness was a shtick all along, confined to signature issues and not applicable towards the outstanding challenge of building a truly democratic and free digital society.
OTOH, was there really a time when humans were not enslaving each other in any form? I don't mean in a wide marxist term like "wage slave", but more specific kinds of bonding and control. Liberal changes in Europe in end of 18th century / beginning of 19th coincided with imported slavery from Africa and new colonies. That is freer factory worker would gain their productivity and better relative freedom while producing added value to raw materials produced by serfs elsewhere.
In 20th century you either had direct serfdom in some countries like Russia, while countries like US owned slaves indirectly by setting up large-scale production in 3rd world countries and controlling their governments.
Today we could probably breakdown the supply chain so that the lower you go by the ladder of "added value complexity", the more interchangeable and less free the people are. On the top of such chain there are managers, IT people, accountants and various service workers for the above who enjoy freedom while the bottom half of the supply chain is much more prosaic and constrained.
I still hold the (maybe naive) belief that the path from the slave empires of previous eras to today was a benign one. The many deficiencies, setbacks etc cannot negate this relative ranking, even if (like Graeber and co might argue) we are conditioning on a particularly negative societal development some millennia ago.
What is really disappointing is that today people have the illusion that somehow we have learned how to keep overbearing power concentration in check whereas it is manifestly not so. The informed and educated "middle class" that should know better (because it is its own existence that is at stake) is missing in action. [My take: A small fraction of it co-opted by the promise of joining the ruling elite, while the majority pushed down into the precariat]
The result is that the same old monsters re-emerge, now in digital clothes.
Since I can't opt out of this and all the scoundrels can see it anyway, I think I should just post my salary on my Linkedin page. If everybody did that, it would undercut this business and bring to light the inequities to the common people.
They can and always do ask you anwyways. Equifax brings a 3rd party trusted account to the table - you volunteering some info isn't helpful, they don't trust your number.
You underestimate dishonesty in the population: having your pay exposed may force your company to reduce it to the lowest common denominator to avoid all the cries by people who simply shouldnt be paid like you (age, experience, output, knowledge criticality, all these things people dont wanna hear)
While I don't like your point in general, feels like a scenario meant to scare people into not sharing information, I'm wondering how age or experience are factors independent of output that should define your pay. Seems to me if you're capable of producing equivalent output (considering both volume and quality) it shouldn't matter how old or experienced you are.
One detail the blog leaves out is that this employment and income collection extends to both Canada and Australia.
Much of the data is noisy and I won't even get into the gory details of data ingestion. I was wondering the other day why hedge funds and etc. aren't using them as an early indicator and I can speculate why. On the other side of the spectrum, your average Joe is at times inconvenienced by Equifax's inaccurate record keeping.
Seriously, is it true equifax in US "sells information about how much you earn" to anyone or is the article horribly misleading? I don't know about US, but some time ago I had dealt with Equifax in UK (when getting a car loan for example, then when renting a flat) and I was told by the paperwork I was given to sign authorising them to run "a credit check" they'll get the following info only:
- confirmation of your details including an address.
- then they plug in the amount you want to borrow and depending on the financial institution doing the lending your data such as
- any bad credit you might have including arrears, court judgements etc
- amounts of existing credit you have (including CC, overdraft in your bank account. Etc).
- regular in-payments in your bank accounts
Gets collated and they get an answer: either yes, or no, and if no, there can be a different lender proposed with more flexibility, but higher cost of lending. The person running the "credit check" never sees any of the raw data except court judgements I think.
So there you go, that's how it used to work in UK few years ago.
Then, you may ask, how does equifax get access to this data? Any bank account or credit product you get in UK contains a contractual agreement that the information about it will be passed to equifax(or credit rating agencies). This includes amounts you pay into your bank account every month, but is it from employment, or your rich grandma sending you gifts equifax can't tell.
To me this sounds fairly reasonable. Especially that I can create my own login for equifax and see who has been running checks on my data and why(it requires one's permission). This sounds very different than "selling your data to the highest bidder". Right?
Not sure about Equifax specifically, but yes, several of the credit agencies also sell salary info. HR departments can use to see what you earn currently before making a job offer, etc. It's awful.
The UK still retains EU data protection laws whereas the US essentially never had any.
Having lived in both countries, the American companies are totally flagrant in how they sell and abuse your personal data. Banks will sell your credit card transactions to advertisers, for example. The UK credit score was a reasonable and stable evaluation of my credit-worthiness based on data from my bank, but its American counterpart is a gamified setup that goes up and down randomly every month and is seemingly designed to make people take unnecessary debt. And so on.
The point behind the GDPR was that you own the data about yourself. And if the data is incorrect, you are able to get it corrected. In contrast, in the US, you own none of the data about yourself - many court decisions have basically ruled that whoever owns the computer (inside which the data is stored) owns that data. And if the data is wrong, only in certain limited areas (such as credit history) are you able to get it corrected. Thanks to Brexit, your country is migrating towards the US idea of data ownership.
There's a great opportunity here for the IRS to provide this service (with revenue from charging the requesting entities), with citizens being self-sovereign over what data is shared and who it is shared with. Especially because they could provide verified data in a very narrow scope (for instance only sharing Adjusted Gross Income and nothing else).
Equifax collects data that isn't true and libels its victims by disseminating it to other parties. Having that power enshrined within the government would not be a good thing.
IRS already has that info. The people have the power to control and influence how that data is handled, and distributed. We have no power to compel Equifax to do anything.
Government is able to compel Equifax to do things, and is run by we, the people, so it seems like we should be able to something, for sufficiently large and powerful numbers of "we".
> Generally speaking, people would get really upset if the IRS shared our tax information for a fee. Effectively, Equifax is doing that, because for most people, employment and income is our tax information. But since it’s a private monopoly, the anti-government types don’t notice or care.
...
> It’s perhaps no exaggeration to note that Equifax is a quasi-governmental agency, a monopoly provider of evidence that you work, where you work, and what you make. If there’s an error, or if someone lies about you, too bad. If Equifax itself is paid to harm you, too bad. If a government agency gets the wrong data and denies you assistance or screws up your immigration status, that’s on you, well, you have limited to no rights in this situation. In some ways, you might have more to fear from Equifax than the IRS.
>The goal isn't to enshrine abuse of authority in governmental agencies, but to prevent nongovernmental agencies from abusing that authority.
I would much rather just whack the big players with antitrust law than give their power to some government agency. A worthless mission statement of some bureaucracy is just that, worthless. If said bureaucracy is using the same information Equifax is using to provide the same services the abuse potential is right there and it's probably only a matter of time until it starts getting used to screw whoever the outgroup of the minute is.
Antitrust law isn't a solution here. Many different surveillance companies keeping records on us creates the same problems (if not more) as a few companies. The fundamental problem is that we have no ability to choose which of these companies we want to associate with.
What is sorely needed is privacy legislation that says that data about an individual is fundamentally the property of that individual, and that the license for commercially storing/processing an individual's data can be revoked at any time. Having choices is the requisite first step to having competition.
The government already has the power to do those things. The track record of credit reporting agencies shows it's almost impossible to hold them accountable, so what's the advantage to having these private entities profiting off of us again?
Only when you give said company authorization to review your credit worthiness, then they may attempt to pull your credit information.
Your information is not broadcasted to all companies in existence only those who you've authorized (or have been authorized on your behalf by a malicious actor / identify thief).
> Your information is not broadcasted to all companies in existence only those who you've authorized
Famously, Experian ("freecreditreport.com") sold partially filled form information. This is before submission and up to 9 times. Feel free to go to the site signup today and watch the information being streamed (in a hashed form) from your developer console.
Filling out a form has no bearing on your credit score. This mechanism is leveraged to monetize someone's information independent of that person's credit score or the accuracy of the information.
Your first paragraph is true (to the extent that nobody pretends to have your authorization).
Your second paragraph is false, AFAIK. In the USA, credit bureaus are legally allowed to sell lots of your info to debt collectors and financial service companies. (According to DoanLaw.com) this is why you get “prescreening” offers for credit cards, mortgage refis, etc.
I don't disagree that the companies are selling your contact information and most likely some fuzzy information ranges (age, gender, martial status, rent/own, income) that's all that's really needed to snail mail "pre approvals" hint you're not really approved for anything until you sign to allow them to actually pull your credit. Preapproved just means you meet the minimum threshold of potentially making them more money than the cost of a 50 cent envelope/paper/bulk mailing rate.
Agree that most of the data needed for a generic prescreening is available from lots of data brokerage (doesn’t necessarily need a credit bureau), but that DoanLaw.com article I read to verify my memory states that credit bureaus may legally sell some data points that can only accurately be sourced from a credit bureau.
I could see the IRS offering some service to enter the market and compete with Equifax to bring more competition to the sector. They might have to compel Equifax to give up some data or data sources to the government and their competitors. The government did this in WW2, forcing companies to give trade secrets to their competitors so there would be a more resilient supply chain.
Something similar could be done to break up big banking if the US Postal Service allowed people to open up super simple checking and savings accounts.
This is a good idea, but I’m skeptical if the IRS has enough funding and resources to manage another service. They barely have enough funding for the current backlog of filed tax returns.
Or rather than further entrenching the idea, we could work towards effective privacy legislation and relegate all of these commercial surveillance databases to the dustbin of history.
There is no free lunch. Limiting credit checks to AGI just means everyone will assumed to have an unknown credit history and will have much higher rates.
You ready to get a mortgage at prime plus 5% instead of prime plus 1%?
But let me guess, we could create a law about that?
Having the government do things doesn’t magically mean market forces don’t apply any more.
The point is not about limiting it to AGI, the point is setting limits on what data is shared so that you as the consumer always control what a requesting company sees. Don't want your data shared? No problem, you can set to deny all requests. Only want to share AGI but not your entire return, just allow that field, etc.
Correct me if I'm wrong, but your response also seems to indicate you don't work in financial services. No company is providing credit based solely on income verification (well, not that I'm aware of maybe some fintech is doing it). Most all credit providers are collating data from various sources to make their decision and it varies more than you might think on what goes into a credit decision.
Further, I don't think there's any need at all for laws for this as you suggest, rather just let the IRS offer it as a competing service with private industry. I know many companies that would sign up right away for such a service at the right price point.
I believe their point is that if you don't provide any piece of information, the consumer of it would just assume the worst. Or, they would average it out, so that the burden of not being accurate would affect the people that do provide it.
People don't understand how credit scores work and you want to give them the power to allow granular permissions?
Just like Facebook gave people granular access to their privacy settings?
If the general population doesn't read EULAs and speed clicks through 99% of dialogs presented. I highly doubt people won't check the _allow all_ box once and be done with it.
Hell Apple gives my significant other the ability to ask apps not to track and they tap to ALLOW the app to track because "I don't mind ads and they'll show me better ads."
Some percentage of people making bad decisions doesn’t mean all people should be forced to make bad decisions. Yes, it’s a good thing that Facebook and apple allow those controls. Yes, it’s a shame more people don’t care about controlling their data. That doesn’t mean people who do care shouldn’t be able to control it.
> You ready to get a mortgage at prime plus 5% instead of prime plus 1%?
So then homes would become more affordable, as monthly payments are the limiting factor? Sounds like a win-win, if that actually were to happen. But it seems unlikely for secured credit.
The main limit for people buying houses is the monthly payment. When interest rates go down, abstract asset prices go up to compensate. When interest rates go up, abstract asset prices go down. So your scenario of interest rates going up would actually make housing more affordable. Lower asset prices encourage things like making a larger downpayment (rather than suffering PMI), and making it reasonable to pay off a mortgage early.
But as I said, the change in interest rates is unlikely to be that large for secured credit like a mortgage, as the main thing guaranteeing the loan is the asset itself.
I don't understand the US credit score at all. What's the predictive value of you paying off a mortgage based on you just shopping with a credit card? Sure if you can't pay your normal shopping cart, probably you shouldn't really be getting a mortgage, but the predictive value besides that seems lost on me. Surely a bank could just ask your payslip info and get a more accurate feel whether or not you are creditworthy?
> Surely a bank could just ask your payslip info and get a more accurate feel whether or not you are creditworthy?
They do that, too. You have to provide all of your income data over the past like 3 years and explain any extra income (why did your parents give you $1000 a couple years ago?). Credit score is just one more datapoint, and I think it's more about your score being "not bad" (i.e. you didn't screw a previous creditor) than it is about it being "good."
Shopping with a credit card literally involves managing a line of credit.
You don’t see how that relates to creditworthiness?
You also believe purely income information is a better indicator of credit worthiness? It tells you almost nothing (which is why income plus all current expenses is used).
A mortgage is about the ability to pay back hundreds of thousands over an extremely long time period. Your normal shopping is a blip, and it makes barely any difference because normal people just use their credit card the same as if it was a debit one (the only difference you pay it off at the end of the month). So it doesn't tell me anything about your ability to handle real credit. What do I care that you pay off a 100-ish bucks a month by buying food? I don't think paying off your shopping cart is very impressive, and someone telling me "I've paid off my shopping carts for over 15 years" (which is what advice US people seem to throw around to use your credit card for) isn't going to impress me, yet this is what a company uses for important stuff? And at least employment status/income tells me something, rather than nothing.
Not to mention the dire warning on the page about making it difficult to get a new job, mortgage, or obtain access to public healthcare benefits if you don't unfreeze before applying. Typical strongman shit.
>The Work Number is so important that Equifax is engaged in the work that should be reserved to a government.
While I'm sure many shallow ideologues are delighted to read it, this take misses the fundamental problem: concentration of power.
Creating a government organization that does the things Equifax does will not change the balance of power even there's some nominal legislature or executive oversight. Worse still would be giving those tasks to an existing agency. The problem here isn't that Equifax isn't government. The problem here is that a singular organization is providing a set of services and the nature of those services and the information processing they do to provide them results in it having too much power and result in those who it affects having too little recourse. Unless you divy up the services Equifax performs across more organizations, public or private, you will not fix the problem (the clearest path to doing this is probably federal anti-trust law IMO).
The US is taking corruption to institutionalized levels probably never seen before in any society. However, the media is so tightly controlled by corporate monopolies that the people of the US still believe they live in a democracy.
I recently interviewed and got job offer contingent on verifying work history, etc. After I cleared that, the link for docusign arrived. I called the recruiter and asked about payroll data sharing. She claimed to have never heard of it. A day later she said they don't do that. I explained my concerns, said I won't work for a company that does not respect employee privacy, and to go ask finance and HR. Just over a week later she confirmed they don't do that and she detailed exactly what is shared and when - State new hire DB, payroll taxes, medical plan, and by court order. I thanked her and signed the agreement to work for them.
We only have a choice if we are willing to use it.
While I sincerely appreciate your diligence, might be wrong, nothing you signed likely prevents your employer from changing their policies, nor was their accounting of what is currently shared by them likely legally binding. More importantly, inaccurate disclosures by the employer of their information sharing practices likely are not regulated.
A cogent argument could.be made that transunion, Equifax, and other big private credit clearinghouses act as direct agents of an unspoken american "social credit" system in which the credit score denies housing and employment to those who refuse to or cannot conform to a largely invisible tome of rules. These agents are then unpoliced as they serve capitalisms direct need for an underclass.
Full disclosure: I am a communist, and recognize most Marxist state social credit systems tend to have the same effect. Transparency in the plenary party sessions seems to do little to reform this cudgel but the parallels in capitalisms version are neat to me.
I see where you're coming from, but on the other hand, the biggest rules are well known and quite simple: If you take a loan and pay it back on time, you'll have high credit. If you fail to meet your obligations, you won't. The existence of an underclass which is constantly on the edge of not being able to pay their bills is true though.
Those are not the only rules though... you can have low credit for not taking out enough loans and not having debt. You get dinged for opening and closing credit card accounts too quickly, even if you've never missed a payment.
Your score goes down if you simply inquire about loans a bit too often...
All of these are "rules" made up unilaterally by the credit bureaus.
I have a few credit cards that I no longer use. If I cancel them my score would go down because the average age/length credit history would go down.
Not by that much, but it is surprising that leaving these cards open is incentivized whereas the more secure and less risky thing to do would be to close those accounts.
The closed card drops off your account history after ~10 years, so your score shouldn't immediately go down. Technically, I'm not sure that the credit scores can differentiate between you closing a card and the bank closing your card (the latter might be some sort of signal of potential change in creditworthiness)
In general, credit scores are optimized for the average consumer - and so behaviors around the edges don't always make sense in terms of your score going up or down. If you think about the system that was replaced by credit cards (i.e. keeping a tab open with many different stores), you'd be hard pressed to say that the amount of credit extended is lower now (overall), than under the old system. Whether that's a good thing or not is a different question.
The balances are instantaneous balances, not ones that are being financed. So, if you use and pay off your card every month (as makes sense to me for points/cash back, ease of chargeback, and convenience), then your numerator won't be zero on most days. (For me, it's not $0 on any days, because of the timing of statements.)
You could theoretically pay off the card before the statement posts to keep the balance at zero. Usually not worth it, but if you want to boost your credit score before getting a mortgage, that trick usually works.
It make a a bit more sense when you think about it - Risk isn’t really the main thing incentivized here, making interest payments is haha. Risky lenders don’t make payments, but neither do people who never take on debt
Credit scores actually are designed to measure risk, not interest payments. Otherwise high credit utilization would be a positive:) There are certainly edge cases where the score has low predictive value, but overall the correlation between credit score and risk is quite large.
Those are minor and often temporary dings compared to not paying back loans on time or at all. For example, if you don’t have a loan history, your score isn’t low enough that you can’t get an apartment or get a car loan. Then by doing those things you can build credit. The other things, open and closing accounts too quickly, or making lots of loan inquiries over a short period of time, lead to temporary dings that recover in a few months (they just throttle your credit). The rules are not explicit enough I agree, but it’s not like most of them couldn’t be covered in a high school financial literacy class.
Almost everyone significantly disenfranchised by bad credit are actually for things that would obviously lead to bad credit (to their fault or not; i.e. identity theft could be involved).
> if you don’t have a loan history, your score isn’t low enough that you can’t get an apartment
This is not true. Many places will deny an applicant for zero loan history, effectively forcing people to get a credit card in order to obtain housing.
That never happened to me when I came back from China (unable to get a credit card for 9 years because I didn’t have a Chinese ID card, so no credit history within the 10 year window they keep track), nor did it happen to my wife, who obviously didn’t have any history as a new immigrant. We didn’t have problem getting a rental with proof of job/income. And without the job/proof of income, even with 10 credit cards, many of these places won’t rent to you regardless of your credit rating given eviction laws.
I get it, there must be some place that denies rental based on lack of credit history, but I would guess it is so rare that you’d have to stretch really hard to find an example.
Correct, but a nitpick: it's not quite an issue (as the parent said) of the score being low per se. From my own experience, in the time when I had no credit history, when I went on annualcreditreport.com or the alternatives, it would happily tell me that I had a credit score of 720-740, but any time I would apply for an apartment, or even the most usurious credit department store credit card, I would get rejected.
So yes, the lack of a credit history makes you look artificially like a bad risk, leading to rejections, but not because the system reports you as "normal person with low credit score" -- that would actually be an improvement!
For those who want to know, I eventually got out of the catch-22 by following up with the service department of a financial-advisor-affiliated credit card, and answering some questions like about employment history.
My parents taught me that debt was bad. They told me that credit cards were traps to get you into debt, that preyed on poor impulse control, and that it was better not to have one. If you can't tell, my parents grew up in a time when the credit score system didn't really matter, and didn't understand it.
I did not get a credit card. I did not have any loans, for school or anything else.
My credit score wasn't even a number, it just didn't exist. Even the bank I banked with, which could see that I had more than $8k USD deposited monthly, that could see I had $30k in an account with them, would not give me a loan to buy a car.
Even if I were to get a credit card and pay it back on time, my credit score would be quite low due to having no history, and I still could not get a loan.
I'm fortunate that the apartments I have rented so far have not done credit checks, only background checks and looked at salaries / offer letters, but there are many apartments I simply could not rent since I would obviously fail their credit check, despite never having had any debt.
>My credit score wasn't even a number, it just didn't exist. Even the bank I banked with, which could see that I had more than $8k USD deposited monthly, that could see I had $30k in an account with them, would not give me a loan to buy a car.
Right, because it's a credit score, not a finance score. I'm not sure what you want here. Do you want credit bureaus to collect even more information about your financial life so they can have a more accurate picture?
> Right, because it's a credit score, not a finance score. I'm not sure what you want here. Do you want credit bureaus to collect even more information about your financial life so they can have a more accurate picture?
To some extent _yes_, if that's how this has to work. If my ability to make significant life steps is based entirely on their view of my ability to pay debts then I would rather they at least have the full picture. As it is it's extremely inconsistent, one place I rented reported my rent payments to some of the credit bureaus (but not all of them), the others did not. Additionally utility bills don't appear, despite them probably being a reasonable gauge of whether you can pay for stuff on time (at least as reasonable as everything else they use).
It is what it is, but I was in that poster's same position and agree with them that it feels like a very dumb situation. I'm lucky that I at least saw it coming and a few years before buying a house I opened a credit card with the only purpose being to build my credit history. I have one thing that charges about ~$8 a month to it and it gets auto paid, and apparently _that_ was a big key to determining whether I'll be able to manage paying for a house. IMO that's just silly.
> Do you want credit bureaus to collect even more information about your financial life so they can have a more accurate picture?
I mean, if instead it was the government, and they could also draw information about my salary, yeah, that sounds kinda nice. Not having to own a credit card to prove that I exist to a landlord does seems pretty good to me.
But my overall point here is that a credit score is not as simple as the above poster made it sound. Someone who's been financially responsible can still run into issues because of this weird system leaking into so many places.
I feel like my parent's point about credit cards and college loans being bad were correct though.
Like, I believe they're right that going to college on a full-ride scholarship was better than going to a more expensive one on a loan.
I also believe they're right that credit cards are bad. Like, banks make money on credit cards by: 1. hoping you miss a payment, and collecting interest, and 2. charging merchants, thus raising the price of goods for everyone (typically)
I guess you're saying that we should teach people "Yes, use credit cards, these tools designed to put you in debt, but be careful. Why use something designed to put you in debt? Because there's another private company that will punish you by not letting you rent certain apartments if you don't use a credit card"
Overall, credit is not advantageous to most people that use it for consumerism. Credit should only be used for investments with a commensurate return above the interest rate.
My parents were quite well off, and my dad often times tried to get me to use a credit card, not because it was free money (i was very well financially educated by them) but because things like credit scores do get checked by employers (sometimes) or housing companies to determine all sorts of things, so it would make sense to buy 1-2 small things (say, like a pack of gum or a sandwich) a month on the card to immediately pay it off, so the credit score would be good.
I protested, and to this day have never owned a credit card. I live within my means, don't splurge on stupid shit, and do money-saving things as much as I can. I don't own a car, and since I'm fortunate to live in a dense city in a warm environment, I can walk almost anywhere at any time of year. There's also free public transportation.
The only "credit" I have is a small amount of margin I have in my trading account, which I only use on topping up low-risk, dividend-paying investments that I also sell deep OTM calls against. It's a slight risk, yes, but it's as delta-neutral as I can get while still making consistent money.
Many people I’ve talked to have very little idea what the factors affecting their credit scores are. Many are unaware or uninterested. I have helped many people improve their credit scores because I have spent hours learning how to game this system. Much of this information is not taught to people until they need credit at which point it’s too late to start establishing a history and your best bet is some bs predatory card that locks up more money than you can afford.
There are already tons of articles and videos that have already been published on this. And now Experian / other bureaus offer score breakdowns along with calculators where you can explore how hypothetical actions would affect your score. I think the space is pretty well covered:)
(For an example, Google for AskSebby - How to Increase Your Credit Score)
As someone else mentioned there is a ton of existing content. The problem is people don’t look until it’s too late because nobody cares about this stuff until it causes issues. Unless schools start teaching real life financial basics the problems will continue.
Credit Karma has been one of my most useful resource for improvements because they break down the factors very well. Many banks have stepped up their game but some don’t give you as much detail.
On the contrary, the actual rules and methodologies for credit score calculations are not documented anywhere public.
Saying essentially "just don't do bad things to your reputation" is at most a very hand wavy "rule of thumb", but it's not a codified "rule" of the sort we should expect to see of such a consequential system.
> On the contrary, the actual rules and methodologies for credit score calculations are not documented anywhere public.
The exact formulas might not be, but the general factors aren't exactly a secret. Hell, the "free credit score" service my bank offers even provides a simulator tool to estimate what would happen to my credit score if I did certain things (eg. get a car loan, or pay off an existing loan).
My credit is tanked from an ex opening up accounts in my name and running up the tab while I was being treated for leukaemia and Crohns. Six years later and I’m still fixing the damage.
Question from someone not in the us: can you legally open a creditcard in someone else's name or does it have to involve some form of fraud?
I'm pretty sure my application was only valid when signed by the requester by that was in Europe and rules may differ. I do know you can open them for shared accounts, but that is not what I am talking about.
I agree with you on the current state, but I think parent may be concerned about future state where unelected, private entity determines your societal worth based on yet unknown rules; or known, but less bound by 'loan paid off' type of information. Right now, it appears to be mostly limited to various financial events, but current state is not guaranteed not to change in the future.
If you understand how credit scores work, you'd realize that what you've experienced doesn't contradict the parent's claim. Specifically, having low credit utilization (ie. low credit used compared to available credit) and high diversity of accounts is beneficial for your credit score. Closing accounts is bad for both of these, hence why your credit score dropped. It doesn't invalidate the parent's claim that you can have good credit by just using credit and paying it back on time. FWIW I have a few credit cards that I pay on time every month, and my credit score is pretty good.
> If you take a loan and pay it back on time, you'll have high credit.
Unless you're on the Equifax blacklist. Journalists who wrote anti-equifax articles tend to find their way there, as do ex-girlfriends of upper management. And conversely women who do NSA hookups with a VP or above tend to find their way onto a whitelist that boosts your credit score by 150 or so - it's considered an unwritten perk of the job.
(The above is purely speculation, I have no idea whether any of it is actually true, but honestly, why wouldn't it be?)
That helps some, but realistically it's a small industry and there are lots of channels (formal and otherwise) linking the competitors. A lot of people working at one previously worked at another.
The difference in the US financial system of credit and a "social credit" system is that these systems measure only attributes about financial credit, and in fact, the US has laws that specifically forbid many social factors from being used.
Additionally, many executives are virulently opposed to people working multiple jobs and are using things like The Work Number to identify and fire remote workers who have more than one job.
Even in our most dystopian RAND-suggested bedtime story vision of a "communist hellhole", those proles who happened to possess a ruble when they got to the front of the breadline could buy a loaf. In the supercapitalist future, all transactions will require the approval of more than the two involved parties. Good luck buying anything if you ever express skepticism toward the great and powerful credit bureaus.
Perhaps I'm misunderstanding something about the point you're making, but in 2023 the third party creditor already must approve any transactions where credit is extended (e.g. credit card)
Credit bureaus remain uninvolved with cash transactions since, er, well, there's no creditor to be concerned about creditworthiness? I don't see how "supercapitalism" changes that
>Even in our most dystopian RAND-suggested bedtime story vision of a "communist hellhole", those proles who happened to possess a ruble when they got to the front of the breadline could buy a loaf. In the supercapitalist future, all transactions will require the approval of more than the two involved parties
What's preventing a "communist hellhole" from implementing something similar? Is it something about state ownership of capital that prevents a third party from interfering in two consenting parties from engaging in transactions? Actually, now that I think about it, aren't communist regimes pretty famous for shutting down markets? Isn't that a variant of "all transactions will require the approval of more than the two involved parties"?
What's preventing a "communist hellhole" from implementing something similar?
Nothing? I referred to a fantasy, not reality. (Don't get confused.) It's possible I missed one of the cautionary tales I was supposed to catch to truly inculcate the proper American fear and hatred of foreigners. If you can point me to some 1980s-era capitalist propaganda that features this particular horror, I'll concede the point.
Back in the real world, it seems possible that e.g. China already has this, or will soon. I wouldn't take either side in the "is China communist?" argument, for fear of offending. I don't care very much, because I don't live in China. I'm concerned with the particular drain that my own nation is circling. You apparently share my apprehension; otherwise you would have argued that this wouldn't happen here rather than that it will also happen there.
Yeah I've had difficulty renting apartments for 8 years because "LeasingDesk" falsely reported that I owed a past landlord $36,000. No one ever told me this is why my applications always faced long delays, additional scrutiny, increasingly insane documentation requirements, and huge security deposits.
Finally I asked my most recent apartment complex "WHAT THE FUCK IS GOING ON?" and they were like "uhh this report..." and I spent 3 months getting LeasingDesk to deny, deny, and finally admit/accept my claim that they had bad data.
It was a nightmare to get it fixed. They just said "No, the data is correct because we called your old apartment complex and they said it was correct." Because LeasingDesk was acting in good faith I could only sue my old apartment complex for misreporting it, I couldn't use CFPB to force LeasingDesk to fix it.
So yeah, its not just Experian/TransUnion/Equifax....there are dozens and dozens and dozens of data brokers acting as credit bureaus. Right now the only protections consumers have from them come from the CFPB but if that's ever abolished we'll only have lawyers and torts.
And before that large companies would keep their own records. My dad needed to put down a 3-figure deposit for his first phone line in the 70s because someone with the same first name and last name who lived in the same town as he went to college regularly racked up over $100 per month in long-distance bills.
I would not loan someone thousands of dollars on a "trust me bro", so I wouldn't expect banks to either. Corruption of the authority judging trustworthiness is bad, but there just needs to be an authority doing this.
The real problem is more likely that wages and living expenses are not in sync, which just fucks over the poor people. Using credit to avoid literally dying on the street is more a symptom of wages making no sense.
It's sad. I don't like it either. I don't trust these people either. Equifax fucked me and millions of others, and I got a check for $5.21. There is no justice and there never will be.
People will tolerate even the harshest laws if they feel like they are applied fairly.
But in this case there is no published rule book, and no published methodology for calculating credit scores. There is not even the most basic transparency.
Don't get me wrong I'd love to see the rule book too. Would you trust the rules though? There will always be the mysterious few with the power. I wish we could just have nice things without corruption :/
The issue is the rules include things like lowered scores after paying off a home loan and companies are using these scores for things that have nothing to do with the likelihood of paying back a loan.
They don’t even do a very good job of what’s intended as people can literally have an 800 score the week before declaring bankruptcy.
>Being bad at that because of inherent inaccuracies in their methodology is a problem.
The parent poster already mentioned that it's "not a crystal ball". It doesn't have to be perfect. Sure, there are some edge cases where it fails, but if it works 99% then it's good enough. On the flip side, do you really want a minority report like system that can predict your future credit with 100% accuracy?
It's also super Kafkaesque, because there is no way for you to know why your score is exactly what it is. There is no published rule book or methodology.
Yep. It’s all a secret. You are measured by an invisible system that you can’t opt-out of, can’t question… oh and just in case you thought you could learn from experience, here comes a newer “version” of the score that determines whether you’re allowed to build equity or whether you’re relegated to paying someone else’s mortgage.
How does “checking if people are credit worthy” reinforce inequity? If you can’t repay, you shouldn’t be taking on debt. If anything it prevents people from taking on debt they can’t afford, stopping them from further inequity.
And you can opt out. Don’t use credit at all. (edit: of course a credit record will still exist, but it won't matter if you don't use credit)
This sounds like a bunch of people complaining “why can’t I just borrow whatever I want without people checking whether I can repay?”
Nope. Whether you use credit or not, the credit bureaus collect information about you and share that with all manner of other companies, including employers.
You seem concerned with a “moral failures” aspect of debt, which doesn’t make for an interesting discussion. If you’re not interested in the complex system of algorithmic finance and its intersection with poverty and generational wealth, I’m not sure there’s much of a discussion here.
I already mentioned that some well paying jobs (the kind that people stuck in debt traps would most benefit from) require an active credit score to obtain. So “not using credit” is not an option. As well, credit is a primary way that the people who hold generational wealth got that wealth. Oh, and they run the system.
You’ve created a straw “poor person” and insist on shadow boxing it. If you ever decide to confront the complex systems that these fellow humans face, I encourage you to read up on the modern credit system. Wikipedia has a good rundown with active sources.
There are no "moral failures" so I'm not sure where that comment comes from.
Either you can pay your debt or not. If you can't, others will use that to infer other things about your suitability for various things like jobs.
The credit score isn't the issue, it's just the medium for transmitting information. Background checks can uncover the exact same issues. I can call your neighbor and ask if what kind of a person you're like and decide not to give you a job based on that answer.
> A reasonable take if you ignore how this system reinforces existing inequality
Sure, it "reinforces existing inequality" but what should we do about it? I'm pretty sure punishing people for stealing stuff "reinforces existing inequality", but does that mean stop doing that? Giving high paying jobs to the most qualified candidate also "reinforces existing inequality", but does that mean we should allocate jobs via lottery? Many things "reinforces existing inequality", but they exist for a reason. "reinforces existing inequality" is just a thought terminating cliche.
> the ways this system is used outside its original scope.
What are some examples?
>Also you have to admit it’s kind of fucked up that there’s no total opt out mechanism.
I mean, you can sort of opt out by refusing to give consent for people to run credit checks on you. The problem is that if you don't they assume you must have terrible credit, so you get denied for a lot of things.
I get what you are saying but you are not the customer. The customers are lenders which rely on these scores to make lending decisions critical to their business.
Presumably these lenders find these scores accurate enough to prevent enough bad loans while not turning away too many credit worthy customers.
That said, obviously the models can be improved with more data. I worked for a lender for a while whose edge was giving people a slightly lower rate (or lending to some folks that just missed the cutoff with other lenders) because we thought our model was a bit more accurate than the credit scores / models used by other lenders.
But even we admitted to ourselves that these were just marginal improvements, by and large the credit score is a super meaningful indicator.
> Presumably these lenders find these scores accurate enough to prevent enough bad loans while not turning away too many credit worthy customers.
And this is precisely the point. If there was an error in your score, you'd have no way of knowing, no reasonable basis for any appeal, and it just sucks to be you. Lenders don't care if individual scores are accurate, they only care about whether they're making more money than they're losing.
It's analogous to doing AI gender prediction: it works fine in the aggregate, but you run into issues at the individual level, and it's the individual's rights that I care about.
// If there was an error in your score, you'd have no way of knowin
I don't think that's true. I remember many years ago getting a free credit report on myself (it may have been a free trial from a monitoring service but I believe you can also just get it from the agencies itself)
You get to see the data that is factored into your score. Anything that majorly dings your credit should be obvious (eg Experian thinks you are delinquent on something that is actually paid off)
I never had to deal with that but likely the error then is with the reporting bank so you call them to fix the issue.
You can know in the most obvious subset of cases of error, but if your score is 573 and it's supposed to be 605, good luck figuring that out.
> Is there a reason you think this isn't possible?
The methodology for the calculation of credit scores is secret. You can't go on the internet and figure out how they do it. They don't tell you, they don't publish it, you can't know. Therefore you don't have the ability to check their work.
I understand what you're saying, I just think it's mainly a contrived scenario. Minute differences in the score (573 vs 605) don't really impact you and there's nobody trying to replicate the calculation to make sure they get whatever it's "supposed to be" - whatever that means.
The more likely scenario where someone is going to troubleshoot is "I paid off all my debts and have a lot of unused credit, how come my score is too low for mortgage lenders to talk to me" - and likely a gross mismatch like that is going to be obvious.
They give you a pretty meaningful guide on what to look for in determining your score [0] that should be enough.
Note, I am not arguing that I think it's good the exact formula is not known, I just think it's not a real problem for either the lenders (who are the ones who actually base their business on this data) or the consumer.
> Minute differences in the score (573 vs 605) don't really impact you
Don't they, though? How do you know? For a person who gets refused access to some important service or product because they're just 1 point under some arbitrary and unknown threshold, yes there's an impact.
Generally credit scores falls in wide bands that give a general credit risk.
573 vs 605 are both very high risk and you’re getting slammed regardless.
The scores are no more arbitrary than the requirement that bankruptcies roll off your score after 7 years. It’s not 6 years, or 6 years and 364 days, it’s 7 years and yes being on either side has a massive impact.
> You can know in the most obvious subset of cases of error, but if your score is 573 and it's supposed to be 605, good luck figuring that out.
Presumably you're talking about the case where somebody never checks their credit report, goes out to get a car loan or whatever, and gets a worse interest rate because there's an error on their report. My question is, what are they supposed to do? They're already required to give you a free report per year. There are various services that give you your score and report for free multiple times per year. I guess a push model would work better, but would you want all the credit bureau to send you a letter to your address on file every time your credit report changes?
>the first thing I'm suggesting they could do is publish their credit scoring methodology
What's that supposed to accomplish? At the end of the day, a credit score is ultimately supposed to tell the lender what % chance you're going to default. Suppose the data is already accurate (remember, you can already request your credit report to check whether it's accurate), what additional value does having the methodology provide? Are you doubting their ability to correctly execute the model? Or do you want to dispute the fact that their model gave you a credit score of 573 when you think it should be 605?
As far as I understand (not a US citizen), the biggest thing people seem to do is:
-get a credit card
-do your normal shopping with it
But this just seems nonsensical to me, sure if you can't pay your shopping cart, a mortgage is very likely a bad idea. But what predictive value is there in this score besides that? For individuals it seems more useful to just ask payslip info instead of some weird arbitrary number to get the feeling if someone can pay you.
While the Work Number is a horrible, anti-capitalist product, I can’t take seriously an article that keeps repeating the premise that having a monopoly is illegal. It just isn’t.
It’d be illegal to use monopoly power to prevent others from competing, but that’s a different thing.
That's why he talks about barriers to entry and market power because using those things to prevent competition is illegal. Sherman Act is actually a criminal statue that can put executives behind bars. There's also the Clayton Act and Robinson Patman act that ban forms of monopolization and price discrimination.
It's up to the courts to determine what's reasonable.
> Section 2 of the Sherman Act makes it unlawful for a company to "monopolize, or attempt to monopolize," trade or commerce. As that law has been interpreted, it is not illegal for a company to have a monopoly, to charge "high prices," or to try to achieve a monopoly position by what might be viewed by some as particularly aggressive methods. The law is violated only if the company tries to maintain or acquire a monopoly through unreasonable methods. For the courts, a key factor in determining what is unreasonable is whether the practice has a legitimate business justification.
My credit report looks fine but I'm guessing there's some incorrect data floating around somewhere, but I don't even know where to start in figuring out what's wrong since nobody will even discuss it with me.