Recap: FICO Score Market Share Slipping, Maldives Adds Departure Tax & More

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• One of their methods is apparently analyzing your purchase history. “Fitness equipment, for example, is viewed as a sign of creditworthiness because it suggest a positive change in the applicant’s behavior.”

  Oh good, so now the geniuses at banks doing consumer credit have concluded people that borrow to buy an overpriced piece of trendy fitness equipment are financially more reliable. That sounds so much better than FICO and not the least bit creepy with privacy at all. /s Wonder how much we’ll pay to bail them out the next time?

  • This older article https://www.wsj.com/articles/use-a-landline-that-could-help-you-get-a-loan-from-discover-11551695400 has even weirder things:

    "A history of discount-store shopping, for example, will boost an applicant’s chances of getting a personal loan, according to people familiar with the matter, while writing the full legal name of an employer on a loan application will lower it. Applicants who report high incomes will be flagged as potentially more risky,"

    It kinda sounds like Capital One's logic, where they want people who are likely to pay interest, not people who will pay their full balance every month.

    • "writing the full legal name of an employer on a loan application will lower it"

      What the actual fk kind of logic is this.

      • The explanation from the article.
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        "those who list an employer’s full legal name, a possible sign a swindler is copying and pasting information"
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        Since Discover targets undereducated people, they suppose not being smart enough to know their employer's full legal name. If they do, they are scammers.

    • I sort of get the discount shopping theory... but writing the full legal name of your employer makes you less creditworthy? So they want someone that buys cheap throw away crap and doesn't bother to ensure they write their employers actual name. Basically your lazy consumer.

      My SO is an SMB accountant/consultant. One of her new customers incredibly makes about 400k a year selling supplements and pays about 6k/mo in fees to credit card companies and are loaned to the hilt with no problem getting banks to give them more. They are dream customers profitability wise except the IRS is about to seize all their assets as they failed to properly pay taxes for years now lol. Good luck getting your money back from them when government is first in line. Perhaps they pay so much in fees it doesn't matter?

      I agree, sounds like they are looking for a profile of consumer that doesn't understand or even care about personal finance so they can take advantage of them. So basically these changes have nothing to do with better assessment of risk, but with overall profitability outcomes. Curious how much they can extend credit to these people before being overexposed and, again, triggering another economic crisis of bad debt. Also, I feel like this press to extend credit is a typical populist idea with very good intentions that will have bad results. In the end you are simply making it defensible for big banks to provide capital to people that can't repay. As if traditional banking won't be predatory if given the shove in that direction.

      • Capital One and Discover target the bottom of society, but regulations prevent them lending to unqualified low-income people so they are promoting to remove those regulations. Nothing to do with helping poor people but ripping off them.

        IRS taking very serious about taxes fraud, that business owner will probably go to federal prison. Many SMB do cash transactions to avoid paying taxes, don't be surprised.

  • I wonder what my daily multi-thousand dollar purchases of VGCs from Speedway will tell them? Maybe HSBC will contact me for some money-laundering advice!

    EDIT: I read the article and it sounds like banks are attempting to provide more credit to individuals whose FICO scores may not necessairaly deem them "creditworthy".

    Hey, i've heard this one before! *COUGH 2008 COUGH*.

  • In a system dependent on increasing growth & consumption, this seems like a ridiculous & inevitable result.

  • In context, though, it's just saying that the BNPL loans use the item you're purchasing as a factor in the decision. Not that the purchase will affect other decisions...

• Can you start posting non-gated links? https://archive.is/G8zgj

  Banks building proprietary models can optimize them for more than just credit risk.
  A risk for them is discrimination by the model of some protected class.

  • Risk analysis is a process of discrimination. They come together. You can't evaluate risk without discrimination or segregation.

    • I foresee lawsuits in the future over these internal algorithms.

      • They can't, It's by laws. After Financial Crisis, banks are required to secure the ability of payments.

        Don't forget what caused Financial Crisis --> LOSSEN RESTRICTIONS OF UNQUALIFIED MORTGAGE BORROWERS.

        Nobody wants Financial Crisis all over again.

        • There have already been (and won) lawsuits over exactly this stuff -- the "machine learning" model figured out common last names of a racial group and started discriminating based on that. Regulator stepped in and said that's racist and forced them to make reparations