They are a company whose sole purpose is to track how reputable a consumer is, which is entirely extrajudicial and arbitrary. How do you fine/hurt/stop something which is pure made up bullshit and had no purpose to begin with?
"Equifax and what they do" replaced a previous informal system without mechanical credit scoring that was far, far more discriminatory than the one we have now. The average HN reader --- and especially the average angry political HN commenter --- would not be happier in a world without credit ratings agencies. The fallacy is that in such a world world, you can get credit (or rent an apartment or whatever) without jumping through hoops. In fact, what really happens is that the hoops get more arbitrary, less standardized, less accountable, and more plentiful.
It is for that reason that we should be especially unhappy about the way the law handles breaches like the one that happened at Equifax. These are companies that have decided to insinuate themselves in a crucial component of the consumer finance industry, and they should be held to a higher standard than we're holding them now.
US bankruptcy is not a service provided by the judicial system to companies. It's a service provided by the US courts to consumers. Our bankruptcy law is notably among the most liberal and consumer-friendly in the world.
From experience helping family members: you can be hundreds of thousands of dollars in debt before bankruptcy becomes a real option. Entire sectors of the consumer finance market are dedicated to keeping them out of bankruptcy, where they become total writeoffs to creditors. I watched creditors offer to settle mid-5-figure delinquencies for nickels on the dollar simply because that was the best they were going to get with a bankruptcy on the table.
The idea that creditors could simply extend credit uniformly to everyone who hasn't declared bankruptcy in the past is ludicrous.
I'm not suggesting that we do that, I am saying that not paying a debt outside of a predefined grace period is a contractual and legal issue, which would be a part of a civil dispute, and also a matter of public record.
How does that address the problem that credit scores solve? If I'm a lender given no data about a potential debtor and my only recourse is to the courts, I'm not going to lend to anyone --- or, if I do, it'll be based on far more arbitrary and discriminatory standards, like whether the right poobah at the local Chamber of Commerce vouches for you personally. That's how it worked before we had credit scores.
Never said we had to go backward, and I definitely don't think that's better. I am saying that the legal system is the demerit based system for this kind of reputation based decision-making, which has completely failed us in the proper function of this task.
You already acknowledged elsewhere the comment where I informed you why the legal system cannot function as a credit reputation service. We had the legal system before credit scores, and we know what the outcome of that system was.
Even today, people (in effect) steal thousands of dollars from creditors, essentially for sport, by exploiting the FCRA and the procedural difficulty of enforcing contracts and collecting delinquencies. The courts are not a realistic option for underwriting consumer credit.
I think we're pretty much on the same page though, the civil courts are not functioning correctly in this regard, but to me that doesn't mean the credit industry is the be-all end-all solution to the problem.
We really should be improving our judicial system rather than letting private industry determine what we as a society should consider when someone wants to take out a loan.
No it's not. You can be behind on payments without filing for bankruptcy. You can have a debt sent to collections without filing for bankruptcy.
There are all sorts of cases where a person is not trustworthy with money that do not show up in the public record. That's why credit bureaus came to exist, and although their business practices and data security leave much to be desired, I understand why they exist in the first place.
Credit bureaus came to exist because of this murkiness when it comes to contractual obligations. If you provide a grace period around a deadline, it's on you, and not something which should be punished against.
If they broke the contract, it's on you to bring them to court. Apparently companies thought it was to expensive to enforce contracts, so they decided to create this extrajudicial system.
My point is, if you can't physically pay your debts, you can file for bankruptcy. That is the public record.
The average duration of a contested civil court case is on the order of 2-3 years. The courts are not going to resolve even a significant fraction of delinquencies, and are not a real recourse in the main for creditors.
I agree! Until that aspect is solved, the standards of when you get reported and for what are entirely private, arbitrary, and have long-lasting effects on your overall wellbeing.
So, like, in a parallel universe where we reinvent the civil legal system, you might have a point? But in this universe, you concede that Equifax has a practical purpose?
I don't consider arbitrary systems practical. I don't define myself by what Equifax thinks of me, and neither should a bank. Unless a proper, accountable, civil system exists, call it for what it is: Bullshit.
Arbitrary means "based on random choice or personal whim, rather than any reason or system." Whatever problems you have with credit scores, they are robust predictors of people's likelihood of paying back loans.
It's also blatantly unconstitutional because it discriminates against the sects of Islam that don't allow loans with interest (and that's the only way to build "credit").
The constitution only applies to the federal government. You might mean illegally discriminatory per the 1964 Civil Rights Act, which disallows businesses to discriminate on the grounds of religion. Even that, though, might only be applicable Equifax's customers, since those are the businesses who would be denying service to people without credit histories.
IANAL but I still think Equifax itself is in the wrong. You can't expect businesses that deal in credit to skip due diligence on their customers. Equifax (and the other 2) get to define creditworthiness for all these other businesses.
> Equifax (and the other 2) get to define creditworthiness for all these other businesses.
They do not. The CRAs provide the information, and the individual businesses decide what their limits are. A lot of businesses standardize on FICO scores, which just use CRA data. So a business decides what's acceptable, based on the info from CRAs and the model from FICO.
Realizing in my twenties that not having a credit card was hurting my credit score, that really summed up to me how loathsome and manipulative the entire system is.
For those who defend the credit history system, where was the consideration that I was mature enough to limit my spending and save for future expenditures rather than use a credit card? Where was the consideration to avoiding unnecessary risk entirely and still paying my bills?
Bankers' attitudes about it make it even more infuriating.
Whenever I'm at the bank I get asked, "Have you considered taking a credit card to start building your credit?" When I patiently explain why I can't do that, their response is usually to just reiterate how important it is and how irresponsible I'm being.
I've never seen a salesperson in any other industry do this. When I ask waiters for non-pork substitutes, they don't come back with, "Listen, I know you don't eat pork but you should get the bacon anyway because it's really good."
One time the lady asked me, how they are supposed to make money from zero-interest loans? How should I know? You're the finance expert. I didn't come in here looking for a loan. You asked me!
What I want to see out of this or future generations is a culture of never-debts, who responsibly save, invest, and not tie their entire lives to credit ratings, shiny garbage, and what wall street wants.
The biggest con job on the American middle class was the 401k though, how else could people be so fashioned against their own interests than to emotionally tie their future so intimately with how the stock market is doing.
I'm not holding my breath on things changing though...
Debt is valuable, man. It fuels growth. Frequently the guy who can do things isn't the guy with money. Debt is one means of the doer guy acquiring the money to do.
How so? A CRA will just report that a loan is paid on time or not. If you can get an interest free loan, and you pay it as agreed, that'll get reported same as any other loan.
There are companies that provide "Islamic" or "Shariah-compliant" mortgages. I don't understand the model, but they claim there's no interest involved.
The key difference would be what happens if you stop paying. Otherwise it’s just a lease with a purchase option at the end. If you can walk away from the lease with no further repercussions, then I can buy that it’s not technically a loan. If the lessor can pursue you for further payments or charges you fees and etc, then it’s just a regular loan with built in interest rate, and it’s a childish way to attempt to get around “interest”.
CRA information gets used in any situation where there are payments over time, even if they aren't "credit" situations. Renting, getting utilities, etc.
All the places I've rented only cared if there was an eviction on your record and I've never had an issue getting utilities -- sure, they usually want a deposit since I have a bad credit rating because I'm horrible at paying bills on time but they always give me service.
The last place I rented started the eviction process the very same afternoon the "grace period" ended -- think I was off doing reserve stuff that weekend or simply forgot -- and that caused me to not be able to move into a fancy apartment complex once upon a time (though, mostly, they were using it as an excuse to discriminate against a "dirty truck driver" who didn't fit the kind of people they wanted in their yuppie complex, which they basically told me) but my current landlord could care less, as long as you pay your rent (not necessarily on time) and don't cause any problems you're golden.
Why would an apartment owner want to rent to someone who had been evicted? I would assume that would be the #1 thing they look out for. Applicants who didn't hold up their end of a rental agreement is a strong indicator.
If your employer paid you late because they were "bad at paying their bills" you'd be pretty upset, as would most people.
I'm not playing victim or making excuses here, just saying that the credit rating game isn't designed to discriminate against people who don't believe in usury (as the OP claimed) but to serve as a tool to warn against people like me who can't be bothered to fulfil their contractual obligations in a timely manner.
If I, in my perpetual slackitude, can acquire all the necessary things to live then someone who does pay their bills on time but doesn't believe in credit should have no problems at all is all I'm saying.
If you define the grace period in your contract, and they are a little late with a payment, punishing them for what you agreed to seems counter to the contract.
If they fall outside of the grace period, you should have a legal means to arbitrate and make it public record.
Yes of course. But when someone says they’re late, I assume it’s after the agreed upon deadline which includes a grace period (since that is the real deadline).
Not that it matters too much but IIRC they said you had until the 2nd to pay and the eviction notice was on the door at something like 4pm on the 2nd when I came home. I thought it was absurdly early and went and paid but didn't realize they went to all the trouble of filing with the courts until I was looking for an apartment a year or so later.
They were also kind of sketchy when I had to break my lease because my reserve unit got called up to active duty, apparently they were trying to say I had to keep paying until my mom (who was handling my finances while I was gone) threatened to get the army lawyers after them which made them change their tune real quick.
They are a company whose sole purpose is to track how reputable a consumer is, which is entirely extrajudicial and arbitrary. How do you fine/hurt/stop something which is pure made up bullshit and had no purpose to begin with?