Hacker News Reader

Comment by themartorana | Hacker News Reader

Same goes for every credit rating agency in the country (world?). Remember all those AAA rated swaps?

It is disturbing how the entire economic system is set up to make life harder on those it's hardest on. Poor, in debt, barely making ends meet? You're lucky if you can get a credit card for under 30% APR. Mortgage rates historically low? Not for you. Need a loan? Sucks to be you.

Finally clawed your way out of debt, trying to get ahead? Tough shit, your credit report will haunt you for the better part of a decade.

View on HN

> Poor, in debt, barely making ends meet? You're lucky if you can get a credit card for under 30% APR.

What about that doesn't make sense? The person you described carries an incredibly high default risk.

If credit scores are unfair to the poor, it's because they don't provide accessible way to fix errors. If your credit score is low because you're in excessive debt and unlikely to pay it off, then the credit scoring system is doing its job.

I don't think they're saying it doesn't make sense.

The point is, we help those that don't need help, and hurt those that are already hurting. We give better rates to people with high credit scores, but people with low ones probably need it more. It can turn into a feedback loop where the only way out is some form of outside help.

Credit scores are not a charity mechanism; they are a way of estimating someone's default risk. People with low credit scores don't get high loan rates because their credit scores are low; they get high loan rates because they're probably extremely risky borrowers. If you want to help poor people, the way to do that is not to ask banks to take on irrational risk for no good reason. In fact, making loans more accessible to people who are in bad debt might actually be actively bad for them.

They are generally just as accessible to people, just at a higher APR. Certain states passed predatory lending laws a long time ago but the US federal government smacked them down. There's a reason why all the national credit card companies have their headquarters in the same couple of states.

Beyond that, credit cards can adjust the APR on existing balances.

It makes perfect sense. Loans are borrowing you need to pay back. If you dont pay back then some honest hardworking person loses his savings.

When we ignored the basic laws of economics we had a mortgage crisis and thousands of people lost their savings and jobs.

Which honest hardworking person shoulders the burden when the federal reserve poofs a billion dollars into existence? Why no outrage over that, but we complain about those who default when the default rate is priced into a financial product's APR and profit margin?

> "Why no outage over that"

There is plenty of outrage over that and all sorts of other things, just not enough to change the way things are. Too many interests, too-many individuals with their entire lives and mindsets invested in the way things work at the moment. As someone that advocates less state-involvement at all levels, I find it incredibly frustrating to watch day to day things unfolding. Every single facet of our lives is affected and skewed by the state in one way or another. Sometimes in a good, and sometimes in a bad way.

"...some hardworking person loses their savings"

No they don't. Loans are insured against default. Interest rates more than cover extremely low default rates and then some.

Clearly you don't understand banking.

https://en.wikipedia.org/wiki/Credit_default_swap?wprov=sfsi...

https://en.wikipedia.org/wiki/Collateral_protection_insuranc...

http://www.investopedia.com/articles/investing/022416/why-ba...

https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...

Clearly you spend more time attempting to belittle than understand the conversation.

Reply on news.ycombinator.com