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Comment by hedora | Hacker News Reader

That makes sense to me.

Having zero debt (and no credit cards) can easily knock your score that low, even if you have a perfect payment record.

The whole credit score thing is an extortion game:

To the consumer: Want a loan? Buy everything on cash back cards.

To vendors: Don't like the fact that we're upping transaction fees? What percentage of your customers use credit cards again?

If they actually were worried about your ability to repay a new debt, the fact that you already have a pile of debt would not increase your score.

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It's not the pile of debt that increases the score. It's the history of repaying that debt per its agreed terms that does.

While I'm not a fan of the credit bureau system, I understand the reasoning behind it. It's an efficient way for creditors to get access to the needed information. Lacking that, to allow the bank to evaluate your creditworthiness among other things you'd likely have to provide a list of references of past creditors and then your new potential creditor would have to validate those references individually: verify you had credit with them, verify you adhered to the payment terms, etc.

For better or for worse today instead of an on-demand complete graph we've got a centralized cache. This serves the needs of the financial players better (read: cheaper) while putting the PII of consumers at more risk.

The point is that the credit score system is utterly dominated by past credit (and its repayment), even though other factors (like current wealth and income) are far more important in practice - and this leads to paradoxical and absurd situations where someone can be filthy rich, but have low credit score because they have zero credit history, never having taken a loan.

Many other countries don't have such a system, and creditors use your past and projected income as a basis for making decisions.

> other factors (like current wealth and income) are far more important in practice - and this leads to paradoxical and absurd situations

From the perspective of the finance industry, these "absurd situations" are so far below the level of noise that they are effectively theoretical. If you want to discuss "in practice": in practice the users of the US credit system have no "current wealth" worth speaking of (look up the median net worth of US households), and their ability to maintain their existing debt is the defining feature of their financial status.

Income is more important than wealth, anyway.

Again, there are many countries - including First World European countries - that don't have the credit score system, or only have reports on non-payments (usually govt-run). They seem to be doing just fine.

Lenders in the US are just trying to maximize their risk-adjusted profit - there's no conspiracy here. If income alone was just as good as income + debt servicing history for making the statistical decisions required to maximize credit industry profits (decisions like whether or not to lend, at what rate, at what ratio to income/assets, etc), do you think the lenders would pay the overhead of the additional useless tracking? Are you suggesting that Equifax & Co. are pulling a fast one on the US lenders and their armies of actuaries and after all these years the lenders haven't noticed the uselessness of the product?

Not at all. My point, rather, is that the credit industry can still function pretty damn well without having access to aggregated credit history and scores, and so banning the practice altogether, or severely limiting the amount of data so collected, in the interests of public good (privacy protections etc), should be considered a viable option on the table.

Not only that. Celebrities that got money quickly often end up with debt or very little money. Having access indirectly via family members is no guarantee. For a bank, such a client can be very risky, much riskier than someone with a regular income.

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