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

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.

Do you also think that way about buying a house with a mortgage (credit)? I don't.

A mortgage isn't used to make more money. It's used so people can own a house after saving for a few years, rather than waiting until they've saved for a few decades.

A mortgage doesn’t make money, but it (can) enable spending less money. If you buy a place such that interest, maintenance, insurance, taxes and the opportunity cost of not being able to easily relocate are less than rent, then you have saved the difference.

It’s also a way to force saving, which is psychologically useful (and thus valuable).

If you buy a house for 500k on a 5% mortgage over 25 years when you are 25, and you plan to live until you are 85, you will live there for 60 years.

It will cost you 35k a year for 25 years, or 875k a year

After 25 years you have no more expenses.

If instead you rent it for 20k a year, increasing with 2% inflation each year, by year 25 you're paying 33k a year in rent, and by year 60 you're paying 66k a year.

Over 60 years you pay 2.4m in rent, or 900k in mortgage (you could also then sell that house for 1.6m with a 2% annual inflation).

You'd have to invest the savings and get way higher than inflation returns to break even.

Of course there's maintenance costs of the house too, but that's with rent far cheaper than the mortgage. In reality rent tends to be a similar amount as a mortgage (in the UK it tends to be higher - as people won't rent places out if they aren't covering their mortgage - at the very least the interest part of it). You'll likely find house prices appreciating more than inflation too - just like stock prices do. Rent tends to track income.

Now you could argue that you'll get more by investing in high return growth stocks. And you might be right. In the 80s there was a whole "endownment" mortgage craze where you paid the interest on the mortgage, and then the rest rather than paying down the mortgage capital, instead was invested.

This was a massive scandal as many investments didn't have enough to cover the mortgage amount upon maturity. With a mortgage you know that no matter what happens with inflation, growth, returns, stock crashes etc, you will own one house after X years.

> You'd have to invest the savings and get way higher than inflation returns to break even.

You say that like it's a difficult thing to do.

S&P500 is up 710% since 1996. Gold is up 92% since 2012.

Personally, the rent control is the best part of a mortgage and even though renting is typically better, I'm fine paying a premium for that. That said, good luck getting somebody to loan you 900k so you can play the stock market; it's much easier to get that for a house though.

> Gold is up 92% since 2012.

And housing is up 125% since 2012, so the sucker who bought gold instead of a house has lost out.

We can all be rich in hindsight.

(There's also other benefits to owning - like being able to have pets, not being able to be evicted, etc)

But the biggest tell that housing is valuable is that nobody is spending $500k on housing to rent it out if they could make more money pumping $500k into the stock market.