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Comment by Spivak | Hacker News Reader

There's no difference at all for someone who works a dayjob. The only thing that matters is that you have you demonstrated that you can make a fixed monthly payment reliably. Paying your bills, paying your rent, paying your CC all demonstrate that. If you rent a $1500/mo apartment you actually have managed $18k of debt.

Doing the same thing but this time with interest proves nothing the others don't. Borrowing history makes sense for businesses or people who with complicated cash-flows. But if you're stably gainfully employed the only things that matter is how you manage your external financial risks (which banks don't check for) and your ability to not over spend (which banks also don't check for).

Combine this with the your typical mortgage is overcollateralized means the magnitude of the loan is essentially meaningless outside of "is the monthly payment something you can afford."

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But what if they discover alcohol/drugs/gambling/etc? They'll fall off the tracks and the loan will never get paid back. Which ofc is incredibly stupid, classist, and racist to boot. And not even a guarantee by someone's credit score. But with a credit score, you have a metric of just how much money to trust them with (not really), which can be plugged into the spreadsheet and you can hire an army of mortgage brokers to plug stuff into the spreadsheet.

Credit score is a moralizing system that hates the poor, so it's unsurprisingly embedded itself into American culture by three corporations that will never be held accountable (see: Equifax leak).

It's as American as the bald eagle. I'll stop now, my cynicism is showing. I just don't see a way to get to a place where we don't have the current trifecta of credit scoring corporations running our lives without a giant pile of money to start a competing credit bureau that makes and underwrites loans based on different computation of a person's score. Because a credit score was initially for rating people on their ability to pay back borrowed money. It's just been perverted since its inception into what we have now.

> . If you rent a $1500/mo apartment you actually have managed $18k of debt.

I agree. And slowly credit scores are starting to take rent into account.

> There's no difference at all for someone who works a dayjob.

But there is a difference. If you put your living expenses on a $500/mo credit card, you can have a $120k job and be eating ramen, living in a flophouse and spending the rest on drugfs or supporting people who cannot work. You cannot afford to service a mortgage. If you commonly service larger debts, then they don't have to worry about hidden things sapping all your funds.

Your friend often asks for you to spot them $5 when you are out at lunch, it’s no big deal and they’ve always paid it back.

Now they want to borrow $5k all of a sudden. Do you give it to them, just based on the above history?

Let's make this more realistic since it's just mortgages but divided by 100. I'm bank of Spivak and you just submitted your loan application to me.

As part of your loan application I can see your savings, income, employment history, and credit history. The payment on a 30-year fixed $5000 loan is $35/mo with current interest rates so that's the bar I need to hit.

* I see that your monthly cash flow is $200 which puts your loan payment at 17.5% of that.

* You're putting 20% down or $1250 which demonstrates to me that you're capable of saving 35x the loan payment.

* Your borrowing history is sparse but you pay of your $5 Spivak CC every month which is 20% of the loan payment right there.

* The loan is collateralized by an appreciating asset whose market value is $6000.

Yes. Obviously I'm giving the loan. To second order no one has a six figure credit history. Their first mortgage is likely to be the first and last loan of that magnitude in their lives.

You gave them an income (post-tax?) of $200/month. Of course that makes it easy to loan them money.

It's also very easy to qualify for a $500k mortgage if you are clearing $250k a year. It makes me wonder how old you are, as "house prices are 2.6x a household income" is something that last existed in most places in the mid-1990s.

> To second order no one has a six figure credit history.

It is remarkably incorrect to treat it as a flat "no six-figure history means they are all are equivalent to a $500 history". Almost everyone has four-figure credit history based on credit cards, most people have five-figure credit history based on car loans and many people have six-figure student debts.

I'm '96 and currently looking to buy a house. I wouldn't expect to qualify for someone to give me a $500k 30yr/fixed loan unless I was pulling in $10k/mo. post tax which yeah, is in the neighborhood of $200k household salary and even then I would be stupid to take it.

I absolutely don't spot them $5k all of a sudden, based on that history. I may based on other factors, but certainly not based on a long history of them borrowing $5 and returning it.

That seems like such an obvious answer to me I want to ask if you intended to ask that of me or the person I was responding to.

You’re right, mine should have gone to the person you were responding to, sorry about that :)

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