Hacker News Reader

Comment by Reason077 | Hacker News Reader

One thing that's not mentioned in this article is that credit card companies will sometimes make last-ditch "clear your debt at a discount" offers before passing your debt on to a collection agency.

This happened to me many years ago. In the wake of the '08 financial crisis, I'd lost my job abruptly and decided to go travelling.

I'd accumulated a balance that was fairly substantial for me at the time (on the order of $10-15k, IIRC) and had been struggling to make the payments. I'd probably been 2-3 months behind on multiple occasions over the course of a year or so when a letter appeared that essentially said "we don't like you and we're going to close your account and pass your debt to a collection agency. However, if you pay off a portion of your balance in 4 monthly payments, and don't miss any of those payment dates, we'll wipe the rest."

I don't recall exactly what the discount was, but it was very substantial. In total I only had to pay something like 30-40% of the balance that I owed, so it was a very good deal. I'm not normally one to skip out on my debts but this was a huge relief to have a chance to be free of that debt: I pulled a lot of strings to make those payments on time!

True to their word, they wiped my entire balance and closed my account, and I never heard from them again (nor any collection agencies).

View on HN

This is because debt collection is a terrible deal: debt like this sells for a very steep discount, because debt collectors generally have a low rate of success of collecting. They essentially rely on apathy, ignorance, or compliance from the debtor, and if there's any resistance put up they essentially just write it off as it's no longer worth the effort (especially because debt collectors often don't have any actual evidence of a debt owed: they get a spreadsheet with names, addresses, and amount owed, and that's it. Something like that doesn't tend to stand up in court). So you probably gave them a better deal then the debt collectors.

Yeah, I’ve had a few things go to collections agency in Europe, most of them small debts from FedEx paying customs charges for a package delivered to me and never telling me they did, sending it right to collections agency.

I have a policy of simply ignoring these.

> if there's any resistance put up they essentially just write it off as it's no longer worth the effort

That's rarely the case. Debt collection agencies will absolutely hound you and your relatives, damn the laws, to try and milk value from you, for quite some time. They will then go to conferences and brag about how they have tricked people into claiming debts, the ways they have harassed people, and other atrocious things.

I mean resistance in the sense of actually knowing your rights and pursuing them with the legal system

This, once you start parroting your rights as a consumer, they’re quick to back off.

Fwiw, a friend works at a collection agency (that’s an entire different story), and it’s exactly as you say. Extremely rare that a company that sells their debt to the collection company will provide them any additional information regarding the debt.

My friend has told me that on occasion the debt collection company will reach out to the original owners of the debt and request additional information, but seldom get a response.

Anyone reading this, it is absolutely in your best interest to fight any debt, no matter if you believe you owe it or not. Nothing changes if you fight it and they have sufficient proof. Best case scenario is they wipe it from your credit report.

If you’ve already began making payments then you’re SOL, as making payments is considered ownership of the debt in question.

I would find it hard to be friends with someone who did this.

same experience, except it wasn't that simple. A family member told me I should settle with them, because that's what they did too. They wiped the balance and closed the account but the settlement stayed on my credit score for 7 years. I had a friend who was getting calls by a debt servicer and was making it seem like no big deal. I told my friend to ask the person about the 7 years, the person reluctantly admitted that his credit score will be flagged for 7 years.

Might as well not pay it, if it follows you anyway

If you want to buy a home you have to pay it, even if you’re past the seven years window. Or at least that’s what USAA did to us.

I had a credit card debt of about $700 after a failed startup that, when I called TD, I was unable to pay. It was “written off.” The debt was from 2015 and I was purchasing a home in the spring of 2023 and despite the balance having been written off 8 years ago, USAA demanded it be settled. So I spent 12+ hours in a Kafkaesque circle of hell trying to find someone to TAKE MY MONEY! Even the agents at TD found it sad-funny how desperate I was to pay and yet they seemingly had no system in place for me to pay off the debt I did owe them at some level. Ultimately, I got escalated so someone high enough up with enough tenure to find the right system to pay and a fax(!) was sent to USAA to settle that underwriting line item.

Interestingly, USAA also managed to find that I had a $25 Comcast bill from something like 11 years ago, likely having missed a final bill on move out of some apartment. This wasn’t reported on my credit report, ever. Somehow they managed to find it and I needed to pay.

I would love to know now about the underwriting process and how they find non-reported debts like my Comcast bill.

They are reported somewhere, that's how they find them. USAA will tell you their source if you ask - you have the right to it under the FCRA.

I've noticed sometimes some "weird" debts only show up on TransUnion and only TransUnion. If you're "checking your credit" with Equifax or Experian you won't see them. There is also "other" credit reports like Chexsystems.

This seems like pedantry on the USAA part. They should add some small fraction of a point to your rate and move on.

I understand you probably get extra benefits with USAA but this would be an automatic disqualification for me and I’d move kn to a different servicer. However, that is _painful_ in the middle of a closing.

Truth be told - we’re looking at ditching them but with banking, home, and auto we are likely stuck with them for the fact of inertia.

Our mortgage was immediately sold to another firm, so there’s no nicety on the part of having a consistent firm there. The process was painful, our processor was impossible to get in touch with, often a 48 hour lag for a reply.

Shortly before moving I was side-swiped by a man suffering a medical incident (diabetic coma after a blood draw) while at a red light. Our premium increased due to “driver history” a month later.

I’ve previously worked directly with USAA staff for due diligence when selling software / services to their firm and they are absolutely on the ball on that front. However, their actual software as an end-user is a hassle, e.g. password rules and UX that look about 25 years old at this point and suggest some languishing old mainframe.

Sweet, sweet inertia…

> Sweet, sweet inertia…

It’s almost as if it was a natural law or something…

Look into Ally Loans. Same deal, you’ll be packaged and sold out within the week, but they have a very, very nice online system for the loan process.

If you are in CA statewide it is illegal to increase your rates for a not at fault crash.

In most other states insurers will increase your rate even if you are not at fault and you only made a claim with the at fault party or your insurer is successful subrogating

If you have Costco membership I highly suggest switching to them for all of your insurance needs, IF they have that service available in your area.

I’m in the Midwest and I pull quotes every 3 years, and Costco has always been a few hundred cheaper than the other cats with the same or better coverage.

Banking should be a credit union unless you require some weird need from USAA.

To be honest, I never bought into the USAA hype, their marketing is strong but their “benefits” aren’t anything more than what’s found at competing banks. Credit unions provide better services and benefits to their customers anyhow.

They are fantastic for banking and insurance but there's no particular reason to get your mortgage from them. When I looked their rates weren't any better.

It sounds like you had a judgement against you. Judgements don't go away, and are enforceable. You probably could have had the judgement vacated.

I have a prepaid online fax account that I use semi-regularly, almost exclusively for dealing with financial matters. Quite useful.

Just a heads up for people living in the EU, it is possible to have things like negative credit ratings removed on grounds of GPRD.

Do you have a source that specifically states I can get a bad debt scrubbed from my credit rating under GDPR provisions? It doesn’t match my understating of GDPR at all.

I got my bad debt scrubbed this way. This was in the Netherlands. It is not always possible, some sources here (in Dutch): https://www.vldwadvocaten.nl/blog/bkr-en-avg-bezwaar-en-verz...

Google translation: “and that means that you can submit a GDPR request to have a BKR registration corrected”

This suggests you can only get records removed if they’re incorrect — is that what you meant?

The record can technically be correct but not in "pursuit of a legitimate interest". In that case the negative record can be "corrected".

So, in my case. When I was a teenager I opened a second bank account with credit card. In only used the card once for something small and forgot about it. Throughout the years the cost of this card started to built up, messages to pay back where not received because I already had a different address and phone number.

Years later this resulted in a negative BKR registration for me. I explained the situation to the bank (that could technically let the registration be removed) but they refused. Later I had a lawyer order them to remove the registration, on grounds that me forgetting about a credit card when I was young was no reason to believe I wouldn't be paying my mortgage. The registration was therefor not in "pursuit of a legitimate interest". The bank honored this.

Very interesting, thank you

... only if they're no longer considered necessary for the purpose of judging your creditworthiness. So in practice you're unlikely to get anything expunged ahead of schedule, filing a complaint only makes sense if the credit reporting agency kept your data for longer than they said they would (in Germany, this is 3 years at most).

Worse than just that, it is also taxable. So you think you're paying a few hundred to close it out, then you get zinged for more taxes in April. If you were counting on getting a refund, you might come up short.

So this is a good point. From the perspective of your credit score, the damage is done when you get to that point. Settling a debt hurts.

Where settling a debt has "value" is around mortgages. It shows that even though the damage was done, you did something to make it right. When underwriters get into the nuances of your credit, they will ask about this.

On a related matter, credit "repair" agencies work very simply, and in a few ways, one being the stress relief of redirecting calls to them rather than you.

But how do they actually "repair" your credit?

Every derogatory item, accurate or not, they dispute, hoping the merchant won't respond or follow process. If they do? They dispute it again. And again. Hoping to catch them out.

It seems like this is the solution: Anytime your debt is sold on, the debtor has the right of first refusal on the price it is being sold for.

If the bank is willing to ding your credit sore and move on through parting with your $1000 of debt for $100, then you should have the opportunity to buy it at that price and be done as well.

I suppose the problem is that if that becomes too prevalent, people will stop paying their bill in the hope that the credit card company will give them a discount

Poor credit can cost you dearly. Higher rates on everything, and a .5% difference in a mortgate rate is massive.

It's a way to burn your credit for years, at great personal cost, so not likely that people will take the out without desperation.

Higher rates on what exactly? Isn't it pretty much just mortgage rates? Plenty of people have no plan or desire to buy property within the next seven years.

In the US, it also means things like getting denied for jobs and apartments.

Car loans will be more: You might not be able to easily buy a new car.

And that's not even getting into some of the other random things. You'll need to pay upfront to replace the washer that went out instead of financing - unless that financing is through one of the rent-to-own places (which still might be cheaper than going to the pay laundry). Same for, say, dental work: Some places used to let you pay in installments if you had adequate enough credit.

How on earth can people be denied jobs for poor credit? You're not a creditor to your employer! Isn't this just the "social credit" system that people worry about in China, except privatised?

Someone with poor credit may be assumed more likely to commit fraud or steal from the company. Someone with poor credit might also be assumed to be personally irresponsible and lazy, and more likely to slack off, ignore necessary details or cut corners.

It isn't fair but in the US money carries moral weight, and many people assume the less of it you have, the worse of a person you are.

>It isn't fair but in the US money carries moral weight, and many people assume the less of it you have, the worse of a person you are.

This isn't about money, this is about debt. Owing money around really does sound like something a bad person would do.

>Owing money around really does sound like something a bad person would do.

Why would this be your default assumption? People can end up owing money for any number of moral reasons. I'd rather someone have 10,000 in debt because they borrowed to help someone with medical debt who would have died otherwise, than for that hypothetical person to die because of a lack of money. From there, it's easy to posit someone losing their job to be a caretaker for said hypothetical person. Et voilà, there's your unpaid debt yet (IMHO) for completely moral reasons. My opinion on debt has substantially changed once I encountered "Debt : the First 5,000 Years".

Why would this be your default assumption

I am not saying it is fair, or that I would make this assumption.

However, car insurance is the same way. If some indicator shows correlation with a bad driver, eg age, birth sex, type of car, rates go up!

Same thing with unpaid/delinquent debt. It is an indicator. If you have 10 good potential employees to hire, and one has bad debt....

Except no one has presented any evidence that bad debt is an indicator of job performance issues.

Car insurance providers have a ton of data that correlates all those factors you mentioned, so for the most part it's reasonably fair for them to set rates based on that. No such data exists when it comes to debt and employment, as far as I can see. Just a bunch of people here arguing back and forth for their personal opinion.

There isn't any evidence, it isn't actually true. Debt is inescapable in a country where a trip in an ambulance can wipe out a family's entire income. It's just a cultural prejudice born from the American idolization of free markets (which itself is a vestigial expression of European classism and belief in noble divinity), rugged individualism (and a pathological fear of societal bonds) and the Protestant work ethic, mixed with a bit of racism and xenophobia.

It isn't about owing money or even debt. You can be in a lot of debt and have good credit. You can also have very little debt and have very poor credit because you couldn't pay a hospital bill or didn't get the final electric bill from your old apartment paid before it went to collections.

It is really about keeping poor people out. You might be able to argue something about responsibility if you can prove that they could pay the debt and chose not to.

Disagree. There's no intent to keep poor people out. Someone who has little but doesn't spend too much will generally have good credit.

Creditors these days tend to treat medical debt separately--someone who has only medical debt probably is someone who is responsible but something happened to them. Likewise, back in the era of the housing collapse and strategic default creditors would look at someone who had a foreclosure but nothing else far more favorably than someone who had a variety of debt issues.

> Someone who has little but doesn't spend too much will generally have good credit.

No, that metric has nothing to do with it. The main things that affect your credit score are a) age of oldest credit line, b) on-time payment history, c) amount of available credit, d) credit utilization.

While "not spending too much" can be correlated to (b) and (d), it's not always a particularly strong correlation.

And even if you do all those things right, one bill -- even for $50 -- sent to collections (because your automated bill pay randomly stopped working and you didn't notice for several months -- this happened to me) can knock 50-100 points off your credit rating. Sometimes you can get this fixed, but the biller has no obligation to send a correction to the credit bureaus even if you pay the $50 and explain why you missed the bill. Enjoy waiting 7 years for that negative report to "scroll off" your score calculation. It just did for me a few months ago, and despite the fact that I have otherwise excellent credit, I was surprised how much my score went up after this was off my record.

Someone who has little but doesn't spend too much will generally have good credit.

No. Living within your means makes you wind up with no credit.

Utilities and landlords rarely report your on-time payments, after all. You have no history, and you need to prove yourself instead of the lenders assuming you are responsible.

And I'll mention here that different places hound folks with a recent bankruptcy, despite a variety of debt issues that led to bankruptcy.

And you can't even measure responsibility from whether or not it is medical debt. I struggled in my early to mid 20's because my then spouse wound up with a major mental health issue. He wound up on disability, and before (and sometimes after) would take money from our account or out of my purse. I know in hindsight that I should have taken different actions, but I didn't think about it in the midst of constant stress.

And at least I was finally able to leave, some years too late, but that shouldn't be required. I left due to unhappiness, not because of the illness. It would be worse if it were a child's sickness that caused the struggle - the bills might be in the spouse's name instead of yours. None of that would show up on a credit report.

Get a store card, use it for things you would have bought anyway. You can build from there. Note that your credit report doesn't really care about how much you borrowed, but how good you were about paying it back.

The presence of debt makes you more susceptible to bribes and blackmail.

Most homeowners have debt. So do lots of folks that own cars. And credit cards. And poor people unfortunate enough to wind up in the hospital with sub-par health insurance. And 18 year old college students with bad judgement about credit cards.

Are all of these folks more susceptible to bribes and blackmail? This is a sizeable portion of the population.

Does bad credit of someone that just declared bankruptcy make someone more susceptible?

Couldn't a company just lessen this by paying well so that folks can get out of debt?

> Are all of these folks more susceptible to bribes and blackmail?

Yes? I expect I’m more susceptible to bribes and blackmail than I would be if I were independently wealthy and mortgage-free.

Not that I want to be discriminated against on those grounds.

Ah, yes, that matters so much when applying for a gas station attendant job.

But please, most people have debt! Mortgages, a car loan, educational debt. Revolving credit card debt, even if they pay off the statement balance every month. (Maybe you personally don't, but you are not typical if that's the case!)

Sure, if you have debts that you are having trouble paying, maybe you'd be more susceptible to accepting a bribe or caving to blackmail? But c'mon, for most jobs out there this is just not a consideration.

That's a weird position to take, considering that one of the foundational concepts of the global financial system is debt. Without debt, our financial system would look very different, and almost certainly not in a good way.

Using debt wisely as an individual is a great way to be able to have and do things that you wouldn't otherwise be able to have and do, and it's perfectly possible to manage that responsibly.

In my 20s I had a girlfriend who considered it a negative that I was carrying educational debt. Despite the fact that a) I was easily making my monthly payment and living within my means, and b) taking on that debt allowed me to attend a top-tier university, which ended up opening several doors in my later professional life that likely would not have otherwise been open to me. My life (15+ years later) is immeasurably better for having taken on that debt, which I fully repaid years ago.

Sure, there's such a thing has taking on too much debt, and being unable to service your debt within the financial framework of your income and expenses. But even if that happens, you're most like not a "bad person". Financial literacy and education in many places (especially the US) is not particularly great, so it's no surprise that many people make bad financial decisions.

Every corner of our economy is dependent on debt. Even the wealthy have debt. Almost anyone who starts a business takes on debt.

It's also possible that someone in debt would do something dishonest against the company, if a bad actor offered them money to do so.

Your statement is still true if you remove "in debt" from it. The question is whether or not being in debt (or having poor credit) meaningfully increases the chances of someone taking the offer from that bad actor. I'm not convinced it doe.

If you live in California your credit score can’t be factored into hiring unless you directly deal with company finances in a specific way, namely in the roles of accounting or finance.

Even if you’re a software engineer working on financial software you’re exempt because you have no direct and common access to the company purse.

There’s a few other states that have laws like this I can’t recall them though l

Yes, but people love cheap debt, so it stays.

I applied for a job at a gas station in the late 90's. The store manager had to get permission to run a credit check that I needed for the job: The dude explained that folks with bad credit were more likely to steal from the company.

Which isn't true, of course, and they had other ways to check for theft - but this didn't stop them.

How is it not true? Do you have evidence refuting the premise that people with bad credit are more likely to skim cash from the till?

Do you?

Its been some years since I saw any reporting on it, and I'm honestly not going to spend the time to dig it up for a comment.

I have no evidence either way, but it is not absurd in my opinion to suggest that people who make poor life decisions in one area of their lives might also make poor life decisions elsewhere.

A bad credit score doesn't really mean you've made bad choices. It just means you had some bad luck.

The reasons for your bad luck can range from medical bills, job loss, missing work when poor (it snowballs) and other such things. It might mean you made a bad decision when you were 18, but it is still hanging around on your credit. You might have been in a financially abusive relationship.

Shit happens, and it is naive to think that you have absolute control over all of it. A few folks simply don't pay, sure, but you can't tell this from a credit report.

And it isn't like you are going to get credit for paying most normal bills on time. Landlords and utilities rarely report positives to the agencies.

And even with all this, it shouldn't realistically mean that folks can't get back up. Most jobs don't need credit checks, nor do most apartments (or at least, limited checks).

> A bad credit score doesn't really mean you've made bad choices.

It doesn't necessarily mean this, sure. But, if we found a thousand people with bad credit scores and did a deep audit, we wouldn't discover 1000 who had unavoidable, unpredictable misfortune. We likely wouldn't even find 500.

> Shit happens, and it is naive to think

I've heard alot of "shit happens" excuses over the years. Few of them struck me as "no matter what this person might have done, they were just fucked from day one". Shit doesn't happen, either in frequency or degree, nearly enough to explain the bad situations many are in. They tend to have alot of minor misfortunes sprinkled here and there among gigantic piles of poor decisions.

>And it isn't like you are going to get credit for paying most normal bills on time. Landlords and utilities rarely report positives to the agencies.

Funnily enough, I work adjacent to a company called Rent Dynamics, and one of the features that they offer is positive credit reporting for those who pay the rent on time. There are others that do this too.

I'm still skeptical of the concept.

Should some company hiring say "sure, he defaulted on that $18,000 of credit card debt 3 years ago, but look... he's paid his rent on time for the last 4 months knowing that if he screws that up he'll be evicted, and that counts for something!" ?

Is that feature worth the slow accretion of extra (and sometimes hidden) fees that are pushing housing/rental prices higher in an era of skyrocking housing costs? Remember, this isn't something that shows up for luxury apartments, it's for the not-quite-slums apartments.

We might find that landlords will do positive credit reporting here in the next few years, and that it's not the good thing you think it to be.

> Should some company hiring say "sure, he defaulted on that $18,000 of credit card debt 3 years ago, but look... he's paid his rent on time for the last 4 months knowing that if he screws that up he'll be evicted, and that counts for something!" ?

No, they shouldn't be looking at this in the first place, because it is -- at best! -- tangentially related to job performance. If you're worried that your employee is going to be distracted by personal financial issues, taking away their option to have steady income certainly isn't going to fix the situation.

> Is that feature worth the slow accretion of extra (and sometimes hidden) fees that are pushing housing/rental prices higher in an era of skyrocking housing costs?

What does this have to do with anything? Housing costs are skyrocketing primarily because of housing scarcity in desirable places to live (where existing residents have enacted policy to restrict further building). On top of that, we have wages that have not been keeping up with inflation, and a general increase in income inequality that helps to push housing further out of reach.

> Funnily enough, I work adjacent to a company called Rent Dynamics, and one of the features that they offer is positive credit reporting for those who pay the rent on time. There are others that do this too.

I actually feel that such companies should not be allowed to report a tradeline.

No company / landlord (and doubly so when you go with, as you say, 'not-quite-slumbs') is offering you rent in arrears. You're paying, in advance, and no credit was extended to you.

To me this is a bastardization of the credit system that's only got potential positive reporting as a side effect. Let's be real, companies like yours real customers are landlords/property managers, not tenants.

Thank you for this comment. You have shared an insight I had not come to see on my own. I doubt I would have come to it by myself.

> Let's be real, companies like yours real customers are landlords/property managers, not tenants.

They are very much so. But if we can help them be more attractive to their customers (renters), then our own products might be more sought after. Or at least that's the theory my bosses operate from.

But how precarious your position was makes a big difference in how likely you are to have severe consequences from a particular bit of bad luck.

Yes but that's not their fault and they shouldn't be penalized for it.

How are they being penalized? Nothing was owed to them, so withholding something not theirs isn't a penalty.

Why should the company assume higher risk merely to protect people it has no obligation to?

The point is that a credit report is probably a poor signal of risk when it comes to the kinds of things most employers care about when considering hiring someone.

If you have evidence to support the idea that a credit report actually is a good signal here, then by all means, present it. If not, then the default assumption should be that it's not useful, or at the very least not equitable. We shouldn't be adding qualifications to things based on guesswork.

And in general, we very often legally require companies assume higher risk in various things (including hiring) in the name of anti-discrimination (for one thing). We consider this to be a benefit to society. In this specific case, I want the person who has bad credit to be able to obtain steady employment (and on decent terms; not just one out of the fewer jobs they'd have to take because the others disqualified them based on their credit) because that's pretty much the only way they'll be able to improve their credit. They'll be able to become more financially stable, perhaps be able to buy a home. All of this is a benefit to the stability of society.

The thing that generally pisses me off about attitudes like yours is that it advocates for a system where when you do one thing wrong, you get further restricted in ways where you're guaranteed to do more wrong things, and every step you take -- even steps taken in good faith, in seemingly the right direction -- makes it harder to dig yourself out from under the mess.

I've found that the people with these attitudes are usually those who have either a) never experienced much in the way of hardship, or b) are one of the rare cases who managed to dig themselves out, despite all the adversity, and now have a chip on their shoulder that makes them advocate for continuing to make it hard for everyone else.

> If not, then the default assumption should be that it's not useful, or at the very least not equitable. We shouldn't be adding qualifications to things based on guesswork.

In a free country, that's for them to decide. I don't think it should be a default assumption. Neither does the government, where excessive debt tends to signal a willingness to commit treason for those who try to get security clearances.

If someone would try to sell documents to the Russians because they carry a x5 debt load of what they should for their income, is it really so ridiculous a concern that they might skim the till for the same reason?

> And in general, we very often legally require companies assume higher risk in various things

Sure, when it's morally the right thing to do, or when it would create perverse incentives if they didn't.

Here? They just won't hire anyone. Self-pay at the pumps, no convenience store at all, or some horrendous gigantic vending machine deal, no employees. That doesn't serve the community, customers, and Mr.-I-Think-Credit-Cards-Mean-Free-Money gets no job.

> The thing that generally pisses me off about attitudes like yours is that it advocates for a system where when you do one thing wrong,

It wasn't "did one thing wrong". It's always "did one thing wrong, then like a misbehaving child decided to do five other things wrong out of spite or for shits and giggles or whatever."

And that behavior's just dangerous to fucking society as a whole.

> I've found that the people with these attitudes are usually those who have either a) never experienced much in the way of hardship, o

Then I'm your counter-example. Grew up on food stamps. Remember living out of a car when I was a kid. Free school lunches. Not just for a little while, first through highschool.

> and now have a chip on their shoulder that makes them advocate for continuing to make it hard for everyone else.

The universe makes it hard on them, and everyone else. Stop expecting others to try to make it easy on screwups.

A de facto penalty is a penalty. I don't care how the corporations want to frame it.

Regardless, I don’t see how making perfectly legal bad choices means you’re more likely to commit crime.

Perhaps we should also deny jobs to people who get divorced or who eat an unhealthy diet, as those can be an indicator of “poor choices”.

You're assuming that a bad credit score actually does correlate with or indicate poor life decisions; many times it does not.

And even in the cases where it does, yes, it actually is absurd to generalize poor life decisions in one life area with other areas.

Some people are just bad at managing finances. That shouldn't disqualify them for any random job.

I think the burden of proof is in the other direction: if someone is going to use some sort of signal or test to determine if someone is eligible for employment, it is on them to present evidence that the signal/test actually accomplishes the objective they expect it to.

In California, it is illegal to use a credit report in employment decisions (unless the position is in finance/accounting). Clearly lawmakers have decided that this sort of test isn't helpful, and is abused to deny qualified people employment.

Do you think those employers want to turn away qualified people and keep the positions vacant?

No, but they might want to turn away a specific employee for an otherwise protected reason. Don't want to hire a black employee? Run a credit check. Statistically, black individuals have lower credit scores than white individuals. Deny them a job based on their credit score.

While that makes some sense, I'm apparently having a hard time getting over my conception that a private business would ever give the rejected candidate a specific reason they weren't offered the position. Surely this is cultural on my part.

In the past, this was common.

People would tell you why, and as a result, you might be able to respond with a reason, or, fix the perceived deficiency.

Now everyone is afraid of being sued, and all sorts of court cases in the last decade or two, validate that fear.

So now no one tells, and therefore, no one knows why.

And so, you never get a chance to explain, or give context, or even prove a mark against you is in error.

Sometimes, social justice solutions can backfire.

Well, people can be denied jobs for almost every reason (except a couple explicitly listed taboo reasons i.e. protected classes), so if any employer believes that defaulting on your debt correlates with e.g. trustworthiness of a candidate, they are free to use credit rating as (dis)qualifying criteria - no matter if that belief is true or not.

Sure, but just because something is legally allowed, it doesn't mean we're not permitted to argue that it's a bad practice.

Some places don't legally allow this, so we should think about why: because it's abused, perhaps? Because it furthers discrimination?

The list of current protected classes isn't some holy thing; we can and should add to things that companies aren't permitted to discriminate based on, when those things are found to be harmful to people and society.

>Isn't this just the "social credit" system that people worry about in China, except privatised

Indeed it is, but Americans have a weird tendency to love horrible things done to them by private companies.

Because for the most part, private companies who you have alienated yourself from have competitors, and don't enforce their displeasure with you at the end of a bayonet while holding shackles. State Level credit system is an actual dystopia.

> private companies who you have alienated yourself from have competitors

Can't alienate yourself from Experian.

The reality is that credit rating has a strong correlation with responsibility. Thus, for example, in places where it's legal to do so insurance rates will be different.

This does end up sweeping up a few who were hit by unavoidable circumstances but most people who get in credit trouble were skating too close to the edge.

The fact that in some (many?) places it's illegal to set insurance rates based on credit reports should tell us something: that at best they're an unreliable measure, and at worst they're (ab)used to discriminate.

No, it indicates that politicians are pandering to the voters who don't like it being used. If it wasn't useful insurance companies wouldn't do it.

Note that exceptions to the correlation has both false positives and false negatives.

e.g. On opposite side of people with bad credit who got hit by unavoidable circumstances, there are people like my partner who have limited credit score upside because they don’t use much credit. My partner has a mortgage with me, but other than that, she doesn’t have any debt and doesn’t use credit cards (other than the prepaid variety which pull directly from bank accounts and don’t contribute to credit scores.)

> The reality is that credit rating has a strong correlation with responsibility.

No, the reality is that responsibility is but one component of credit rating - another, moreso, being 'how attractive are you as a customer to credit providers'.

This is why your score might drop when you pay off an account, or close it. Defenders of the system and CRAs will say "well, there's less information to assess your creditworthiness now that that account is closed", as if, say, you had ten years of on time payments on that account, but they mean nothing.

Bah. If you have no intention on purchasing a home then you're free to not care.

- Buy a used car in cash and wait a couple years for the bankruptcy mark to fall off. - Your credit has to be absolutely thrashed to not get an apartment, even then there are plenty of private landlords that won't do a credit check.

Its almost as though the presupposition is that you need financing for anything in life. You can save and pay cash, its possible. People have been doing this for generations and have been just fine. Businesses need to run off credit, individuals don't. Pay your way and live reasonably.

I always find it weird when someone puts forth the attitude of, essentially, "you don't really need these things that other people have, so just deny yourself the things you want and it's all good!"

I will certainly agree that "keeping up with the Joneses" is a very real phenomenon, and we are marketed to death to get us to want things we don't need, that actually won't make ourselves happier or our lives better.

But there's a lot of wiggle room there. Debt is a useful tool, and it can measurably make our lives better if used wisely and responsibly. Should a few mistakes push you into a different class of people who don't have access to that? I would say no, that's unjust.

And that's without getting into all the ways that a credit report often doesn't accurately reflect your ability to manage debt, either just because of its imprecision, or because of reporting errors and unaccountable businesses that don't care who gets screwed over.

It's a factor in insurance in most states- auto, renters, and homeowners insurance.

Good luck renting a halfway decent apartment with poor credit.

Any sort of credit. Car loans, credit cards, overdrafts, phone contracts, personal loans, if you are a business owner they can affect your commercial loans. Rental agreements too.

Back in the early '10s I was reading a report from a guy who had stellar credit and the card limits to go with them. He ran up about $100,000 of debt on his cards on purpose and stopped making payments. He then approached his bank to settle the debt and negotiated a 60% discount. The account was marked "paid by customer" so it never appeared on his on his credit report as a default. He did get dinged for missing payments though, but was $60,000 richer.

Doesn't the IRS consider settled debt as income? Did he have to report that?

Yes, but "defaulting on $100k as an income strategy" is a tier above the usual tax avoidance schemes in terms of risk, so I suspect he availed himself of those too and wound up paying very little tax on the $60k.

I have a family member who did something similar - perfect credit and defaulted on purpose. On a rental property, he was underwater on the mortgage at the time of the 2008 crash, so he simply stopped paying and let the bank foreclose and came out ahead that way. Trashed his credit rating but he never had any need for it, he had enough to buy his own house and car outright.

AKA 'jingle mail'

aka Strategic default. There was a lot of that in states where the lender doesn't have recourse beyond reclaiming the house.

> On a rental property, he was underwater on the mortgage at the time of the 2008 crash

What I don't understand is why people worried so much about being underwater. As long as you kept making payments, couldn't you ride it out and still own the house as the market recovers?

> Trashed his credit rating but he never had any need for it, he had enough to buy his own house and car outright.

This feels like it should be considered some kind of fraud.

The rest of the story in this case was that the tenant had also stopped paying, so it was easier to just let the bank deal with the eviction. As for why worry about being underwater - it's because you don't know the time frame of the recovery; the appreciation might have lagged behind the mortgage interest for the life of the loan, as far as anyone could see in the depth of the crash in 2008.

If he had just paid the minimum $25 or whatever, he could've avoided even missed payments.

> The account was marked "paid by customer"

This is a lot harder to do these days. Not impossible, but definitely harder. The CRA contracts disallow marking an account as paid that was not paid in full (more commonly, people try to negotiate 'pay for delete' to remove derogatory histories).

As the article points out, the credit card company getting 30-40% was actually a great deal for them: if they had to sell your debt to collections, they probably would have only gotten 3-4% from that sale.

In this case the difference between what you owe and what you settled at will have to be claimed as income on your taxes.

What bank was it? Have you tried getting a credit card with them since? If so, were you successful?

MBNA Canada. And no.

Reply on news.ycombinator.com