←back to thread

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

(www.axios.com)
277 points cebert | 6 comments | 24 Jun 25 00:03 UTC | HN request time: 1.185s | source | bottom
Show context
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.

replies(42): >>44361792 #>>44361861 #>>44361865 #>>44361871 #>>44361931 #>>44361944 #>>44361950 #>>44362065 #>>44362085 #>>44362133 #>>44362148 #>>44362177 #>>44362254 #>>44364104 #>>44364281 #>>44364325 #>>44364438 #>>44364536 #>>44364685 #>>44364877 #>>44365174 #>>44365292 #>>44365599 #>>44365679 #>>44365774 #>>44366064 #>>44366444 #>>44366485 #>>44366511 #>>44366874 #>>44366996 #>>44367040 #>>44367169 #>>44367332 #>>44368257 #>>44368662 #>>44369054 #>>44369100 #>>44369614 #>>44369775 #>>44371322 #>>44371454 #
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).
replies(3): >>44362027 #>>44364389 #>>44366493 #
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.

replies(5): >>44362060 #>>44362117 #>>44362452 #>>44364239 #>>44364392 #
Arainach ◴[24 Jun 25 01:36 UTC] No.44362060[source]▶
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?

replies(2): >>44364117 #>>44365626 #
1. bluecalm ◴[24 Jun 25 08:50 UTC] No.44364117[source]▶
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.
replies(1): >>44364317 #
2. hnbad ◴[24 Jun 25 09:30 UTC] No.44364317[source]▶
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.
replies(2): >>44364584 #>>44365765 #
3. klabb3 ◴[24 Jun 25 10:19 UTC] No.44364584[source]▶
You don’t even need an industry to convince you. Eg former Soviet countries were/are notorious for being obsessed with material luxury.
4. bluecalm ◴[24 Jun 25 13:01 UTC] No.44365765[source]▶
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.

replies(1): >>44366099 #
5. scythe ◴[24 Jun 25 13:33 UTC] No.44366099{3}[source]▶
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.

replies(1): >>44367202 #
6. barchar ◴[24 Jun 25 15:21 UTC] No.44367202{4}[source]▶
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.