FICO to incorporate buy-now-pay-later loans into credit scores

For a lot of folks, credit is the only way they're surviving on something close to minimum wage. Or credit was the only "safety net" they had during a rough time. Almost none of these people have the kind of collateral needed to use credit to truly transform their lives, and the government assistance for that is seriously lacking in the US (SBA loans are terrible, and you need enough money to cover your own salary until your business gets up and running).

> credit is the only way they're surviving on something close to minimum wage. Or credit was the only "safety net" they had during a rough time

In my experience, the average American has no concept of saving money, and those below average even less.

It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of their income, however meager it may be, out of an expectation that they will need it. What do you see in practice? You see people dashing over to the nearest rent-to-own rims shop. (If you don't know poor people, you may not know such businesses exist.)

> Almost none of these people have the kind of collateral needed to use credit to truly transform their lives, and the government assistance for that is seriously lacking in the US

I doubt that greater availability of credit, perhaps facilitated through government subsidy, is what precludes the majority of such people from transforming their lives.

When everything around suggests that the system is rigged against you and care against you, it's no surprise that many people live for the moment and try to find some small bit of pleasure or joy in the moment without planning for a future that may not come.

It's easy to say "why don't they save more?" from an upper or middle class stability, but when the price of everything keeps going up, the police are out to get you, and healthcare is just a fast track to debt that will take away any savings or assets you managed to have, what's the point?

> It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of their income, however meager it may be, out of an expectation that they will need it.

Congratulations, you've just discovered that human beings are not perfect rational actors.

Economists hate this one weird trick!

I mean I guess they get some perceived value out of the rims that makes the stability trade off worth it.

You can't individual financial education your way out of systemic poverty.

Furthermore, the common pattern where poorer people spend money as soon as they get it is, in fact, rational when you look at it from their perspective rather than your own (which, as with most people attempting to moralize to poor people about their choices, appears to be a perspective of "you should be doing absolutely everything you can to maximize your net cash flow").

First of all, people need things like little luxuries. A Starbucks coffee here. A joint to smoke there. We are not, and cannot make ourselves, robots who live only to produce.

Second of all, they know, from experience going all the way back to childhood, that if they have an opportunity to splurge a little now and don't take it, they'll lose that opportunity.

Third of all, they similarly know that regardless of whether they splurge on an ice cream cone today because it's 90°F out, whatever financial trouble that comes tomorrow to eat up the little surplus that makes that possible will still put them in debt. Being in debt $150 instead of $145 just doesn't make that much difference. And if they wanted to avoid that particular debt entirely, they'd have to give up 30 separate instances of "I have an extra $5 today, let me get something to make life a little less shitty".

The only solution to the problems that lead to people not being able to save is increasing the amount of money they get paid.

There's also family situations where liquid savings are at risk of being spent by somebody else. I don't think the marshmallow test people factor that in, you'd need to have a third option where the kid waits dutifully for the extra marshmallow but it gets eaten by someone else in the meantime.

It would be easier to buy that argument if it wasn't happening in countries where healthcare is not fast track to debt and police is not out there to get you. I come from such a country and a lot of financially struggling people overspent on status symbols all the time.

> You see people dashing over to the nearest rent-to-own rims shop. (If you don't know poor people, you may not know such businesses exist.)

And many on this site don’t recognize a racist dog whistle I guess.

Whatever you put aside is not going to be enough to prevent complete financial ruin if shit hits the fan. You might be able to cover smaller emergencies like an appliance breaking or your car needing repairs but literally just giving birth or being in an accident can bankrupt you in the US. I'm not at all surprised low to medium income Americans would just give up and accept their inevitable financial ruin instead of trying to be maximally frugal and socially ostracize yourself, forego most forms of entertainment/recreation and still not be able to get out of survival mode.

Desperation is a good motivator - but not for rational actions. It triggers our survival instincts: hoard what you can, feed on what you can get, grow fat, make rash decisions. This is what the modern economy is built on. FOMO, impulse shopping, conspicuous consumption, high calorie fast food, deals and discounts on overpriced goods, planned obsolescence, etc. We need consumers to be perpetually desperate and starving. Credit just means we can circumvent Henry Ford's problem of them not being able to afford to buy anything because they still can't afford it but are able to pay for it until their credit line runs out.

Sure, because status matters more than finances. Getting rich may be extremely unlikely if not outright impossible. Looking rich to your peers (and "feeling rich") on the other hand may just be a few years worth of small affordable installments away - even if it's completely superficial and short-lived. And entire industries will literally spend your every waking second trying to convince you that buying their product will make you feel rich.

Yes. And that doesn't have to be an addict family member or a burglar, it can easily be e.g. a landlord who sees that you have more money, and charges you more money. There are a lot of people in a position to make you give up what you have, if they see that there's money to be squeezed.

This is even more true collectively: as an individual, maybe you can get out by being 50% more frugal than the rest. But everyone can't be 50% more frugal than the rest. If everyone tries, it's even more likely that larger society claws it back through higher rents, lower wages etc.

You can't really survive on that. It's a snowballing situation. It's perhaps a strategy to avert impending catastrophe but it's like pitching an airplane down to gain speed when the engine is stalling. If it gets you to restart the engine the brief nosedive may let you survive, but if you have to keep turning the nose more and more vertical, the you're gonna meet the ground.

I'm picturing you in my head as one of those 19th century Englishmen, writing about how being poor is a moral failure and the famine in Ireland is actually a punishment from God and thus nothing should be done about it.

Good analogy.

This. If you’re poor and get money, there are all kinds of people interested in getting a slice, and if you’re a good person, you’ll probably have family members who genuinely could use it for necessities. Govt/creditors can also apply systemic pressure like ”oh you no longer qualify as poor this week, so we’ll take back your benefits”. Well thanks, now I’m poor again.

Employers especially don’t like when people break out of poverty, because as soon as they have a buffer they can make choices and bargain. So there’s a lot of deep pocket incentive to keep people in their place.

You don’t even need an industry to convince you. Eg former Soviet countries were/are notorious for being obsessed with material luxury.

People need to stop moving out of their parent's house if they can't be stable. That's the root cause of a lot of the problems in the US.

Your oversimplification placing the blame back on Irish farmers is troubling. Maybe you should do some reading to clear that up? Let's start here: https://en.wikipedia.org/wiki/Great_Famine_(Ireland)#Causes_...

> In 1800, the 1st Earl of Clare observed of landlords that "confiscation is their common title". According to the historian Cecil Woodham-Smith, landlords regarded the land as a source of income, from which as much as possible was to be extracted. With the peasantry "brooding over their discontent in sullen indignation" (in the words of the Earl of Clare), the landlords largely viewed the countryside as a hostile place in which to live. Some landlords visited their property only once or twice in a lifetime, if ever. The rents from Ireland were generally spent elsewhere; an estimated £6,000,000 was remitted out of Ireland in 1842.

> In 1843, the British Government recognized that the land management system in Ireland was the foundational cause of disaffection in the country. The Prime Minister established a Royal Commission, chaired by the Earl of Devon (Devon Commission), to enquire into the laws regarding the occupation of land. Irish politician Daniel O'Connell described this commission as "perfectly one-sided", being composed of landlords with no tenant representation.

Seems more like the wealth of Irish farmers was consistently extracted and sent out of the island, ensuring none of them can get out of poverty. Reminds you of something?

We need to change money flows and redistribute wealth so people can have a hope of saving some money, because they actually can make more money than they absolutely need.

This is a bit too romantic imo. From my eyes, it's mostly:

"An old AMG at 20 is better than a new Ferrari at 60."

There's a slider for how well you want to live your early vs late life. If you work hard, you'll be better off later, and if you go crazy early on, you'll be worse off later. However, there is a point in that you can't catch up on 20-year-old sex, getting drunk or drugged up out of your mind or general fun with friends at 60.

It has nothing to do with credit. The whole buy-now-pay-later, 0% rates or pay-day loans industry came much later here. The same goes for predatory marketing industry.

When I went to elementary school everyone was poor as it was a year after communism collapsed. People were still spending their last money on shiny things back then even if those shiny things weren't as shiny as they are today.

>>Getting rich may be extremely unlikely if not outright impossible

Again, in communist and then post communist countries no one thought we could be rich. The things we thought about back then was being able to buy enough food and trying to educate ourselves as education was valued in itself in some families. Even back then a lot of people spent their last money on pointless shiny things.

I feel Americans and some Western Europeans look for ways to justify dumb behavior and come up with all those theories that have nothing to do with human nature. If you grow up in a country where everyone is the same race, everyone is poor (at least for a few years), the police is not out there to get you and healthcare is free even if terrible and you still witness people making the same stupid decisions you realize it has nothing to do with those theories and everything to do with education, values and ability to make sensible decisions.

And then you have the same people complaining about low birth rates...

I think you're half right. But there are cultures in which people save money. (You can just run a web search for "savings rate".)

My hypothesis is that "human" nature does play a role, specifically a very general phenomenon in animal psychology called "observational learning". If you see people around you who saved money and it worked out for them, you're more likely to imitate those people. Saving money probably isn't instinctive for the vast majority, but that doesn't mean it's unattainable.

Taking the contrapositive, if we look at cultures where people don't save money, it's probably because of a lack of successful role models. Saving money hasn't worked out for people in that culture in the past, so there's nobody to imitate. There are always going to be a few people who do save money, but if they get wiped out by medical debt, rampant hyperinflation, or some other systemic crises, or if the country's bankruptcy laws are so generous that their spendthrift counterparts ultimately live better than they do, then their behavior is less likely to catch on.

In the US, savings culture has been decimated by years of QE and ZIRP, so the people who poured all of their money into housing and stocks did better than the cautious types. Skeptics have claimed for years that this will lead to an awful hangover. We'll see.

You need money to cover your expenses. Forgoing the rest of your salary is a very, very cheap form of leverage.

For the risk to make sense you probably do already need enough, though.

Does living independently before you get married make you more or less likely to have kids? That would be an interesting statistic.

Everyone can't be 50% more frugal than everyone else, but it's possible for "everyone else" to be something other than 3-4% (the current US savings rate).

The money to sustain a high savings rate without a collapse in wages/demand ultimately comes from the government deficit, or deflation I suppose. This can be sustained even without productive real investment, if people just want savings the money will just sit around or repay debt without bidding anything up in the economy.

> landlord who sees that you have more money, and charges you more money.

You were getting a good deal then. Can happen with "affordable" housing I suppose.

"Agriculture" didn't fail.

The Irish were successfully farming a number of highly nutritious crops. It's just that all of those were taken by the English, under the colonial system of the time.

The potatoes were one of the very few things they were allowed to grow for themselves (and are a great staple crop! near-complete nutrition all in one handy package!). That's why they were left starving when the potato blight hit, not because they were pathetic unenlightened regressives.

There is a ceiling on how much you can spend on these things. Generally it is not fun to get drunk or high that frequently, and in the limit you die.

I'm not and never have been into drugs, alcohol and clubbing, so I don't know the limit.

The most I've seen was a ~1k EUR monthly budget for drugs by a person I knew whose main hobby was drugs. It's not astronomical, but we were both students in ~300 EUR/month dorms. It also affected his career progress. Lectures at 8 AM don't mix well with coke the night before.

With cars, the sky's the limit. I'm making 6 digits, and I can still ruin myself financially in a weekend.

And it's not just financially. I love motorcycles because they're cheap, but if I have a proper accident, it'd set me back months if not forever.

It has a lot to do with the structure of economies. Usually they're big exporters with fairly stable currencies. The differences in savings rates are super huge, even within cultural groups.

Demographics also play a role as does inequality.

This assumes, among other things, that they come from a stable home that has space for them and access to the things they need to create and maintain an income stream.

So, the potato blight didn't have anything to do with the Great famine?

I mean, yes. A country that maintains unnecessary employment in agriculture won't have the labor force to develop industry.

Accumulated capital, will by necessity flow towards other countries, where factories can be built and staffed. Meanwhile, because of the lack of potential competition with industry, the agricultural workers will be treated as poorly as the capital owner pleases. But that doesn't mean they'll be happy to be expelled from their lots of land, even if it'll help them.

None of that should be a mystery.

If you look at the home ownership rates of that generation it would be a fair assumption

This is now happening.

For the entire population, sure. For a subpopulation that doesn't have a stable income, not necessarily, particularly given class mobility statistics.