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

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277 points cebert | 5 comments | 24 Jun 25 00:03 UTC | HN request time: 0.81s | source
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PostOnce ◴[24 Jun 25 00:47 UTC] No.44361768[source]▶
Theoretically, credit should be used for one thing: to make more money. (not less)

However, instead of using it to buy or construct a machine to triple what you can produce in an hour, the average person is using it to delay having to work that hour at all, in exchange for having to work an hour and six minutes sometime later.

At some point, you run out of hours available and the house of cards collapses.

i.e., credit can buy time in the nearly literal sense, you can do an hour's work in half an hour because the money facilitates it, meaning you can now make more money. If instead of investing in work you're spending on play, then you end up with a time deficit.

or, e.g. you can buy 3 franchises in 3 months instead of 3 years (i.e. income from the 1 franchise), trading credit for time to make more money, instead of burning it. It'd have been nice had they taught me this in school.

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candiddevmike ◴[24 Jun 25 01:03 UTC] No.44361871[source]▶
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).
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gottorf ◴[24 Jun 25 01:32 UTC] No.44362027[source]▶
> 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.

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1. danaris ◴[24 Jun 25 02:48 UTC] No.44362452[source]▶
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.

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2. pjc50 ◴[24 Jun 25 08:47 UTC] No.44364101[source]▶
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.
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3. vintermann ◴[24 Jun 25 09:39 UTC] No.44364364[source]▶
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.

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4. klabb3 ◴[24 Jun 25 10:15 UTC] No.44364565[source]▶
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.

5. barchar ◴[24 Jun 25 14:30 UTC] No.44366681{3}[source]▶
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.