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.

> the average person is using

The "average person" is told from birth to consume as many things and experiences as possible as it if was the only thing that could give their life a meaning. The entire system is based on growth and consumption, I have a hard time blaming "the average person"

Wages for the average person (working class) typically remain stagnant while cost of living increases, particularly through inflation. I imagine minimum wage would be 25-30 bucks an hour if it did track inflation and that would only serve to keep your purchasing power constant.

Credit, in this sense, is also used to solve a cash flow problem. It’s a bad sign when that credit (or Klarna Pay-in-3 style setups) is applied to basic day to day expenses like buying groceries or other necessities.

Basically the market’s answer to increasing poverty: you’re not getting paid more, so how about we give you a payment plan to spread things out?

That's not true. Wages have generally outpaced inflation as long as we've measured inflation properly. Up until the early 1970s this was very palpable, since the early 1970s the delta has been much lower, wage increases have been very slightly above inflation.

Why does it feel different? 1: the amount of stuff we buy has increased a lot. Anybody who owns what would be considered solidly middle class in the early 1970s will feel quite poor today. 2: financial security is way down.

In the early seventies a middle class family of 6 would own a 1200 square foot house, a single car, a single TV and a single radio would be the sum total of the entertainment electronics they owned, they'd have less than a dozen outfits apiece, they'd eat out about once a month, a vacation to a neighboring state would feel like a splurge, et cetera.

But they were relatively content. 1: they were much better off than their parents and grandparents, who experienced the depression & WW2. 2: they were "keeping up with the Joneses". 3: they had a feeling of financial security due to job security and the fact that serious health events were unlikely to financially devastating.

Average American household budgets are dominated by housing, transportation and taxes.

Maybe some of that problem is about spending too much money, but it cannot be denied that housing are unaffordable and that transportation is inefficient and is a mess.

That's a two-edged sword. Food, clothing, cars and all sorts of factory produced stuff are significantly cheaper today than they were 50 years ago. So they don't dominate budgets the way they used to 50 years ago.

Yes, so why are we ignoring that housing is multiple times more expensive? Even with 5 times the luxury expenses, you're not going to end up cheaper than boomers who paid $1000 on a mortgage in a high COL area. Telling people to penny pinch on buying Netflix subscriptions while rent is 70% of their budget is just political theater at this point.

Rent per square foot per person as a fraction of income has been relatively constant. Rent has gone from 13% of income in 1970 to 30% of income today, but average house size has doubled and average family size has halved.

Renting is not owning (no benefits accrue from asset appreciation). The same calc for ownership is very different. Also would love to know % of population in 1970 that rented versus today. My guess is it's much higher today.

But renting has no property taxes or maintenance costs and should cost a lot less, meaning you can take the money that would have gone to those other things and invest it to earn returns on it.

I pay 600/mo in rent, so 7200 a year. A basic house around me would easily be about 7200 in property tax + average annual maintenance costs + increased utility costs + increased insurance.

So how am I losing out on anything unless you think that a house value (minus loan rate) would appreciate more than I can earn with that money instead invested in the stock market or some other real-estate investment deal like multi-family units.

I guess it depends somewhat on where you live and what interest rates are doing when you buy. Where I live (and true of virtually everywhere else I've lived over the last 20+ years), monthly rent significantly exceeds what the monthly mortgage repayment would be for the property if bought. Rental prices also seem to increase in lock step with or even above house price increases. So as the underlying asset appreciates (benefitting the landlord), rental prices also go up, further compounding the "loss" of not owning. This is before we talk about the possibility of using the gains in your property's value as collateral, something obviously not available to renters (or the advantage of locking in a <3.5% 20+ year loan; or the tax advantages on capital gains from property versus stocks). Also, might be different in the US, but in the UK the tenant normally pays the annual taxes.

>Where I live (and true of virtually everywhere else I've lived over the last 20+ years), monthly rent significantly exceeds what the monthly mortgage repayment would be for the property if bought. Rental prices also seem to increase in lock step with or even above house price increases.

That just seems crazy to me as rental price here is like 1/3 of what a mortgage would be on a decent house I can find.

Also property taxes seem to go up just as fast or faster than rental increases.

I mean my rent increases like 2-3% a year over the last 15 years that I have been renting.

If I look back over my spreadsheets I have spent about 100K on rent in the last 15 years that I have been renting and that includes water and heat.