'And 5 percent had errors that could be devastating, potentially denying lines of credit to them and making things like auto insurance prohibitively expensive. “To have that error level, it’s akin to 5 percent of automobiles spontaneously accelerating and having an accident, or 5 percent of planes falling from the sky,” Wu says. “We wouldn’t accept that error rate in other areas.”'
This is a dishonest statement. Having your insurance be slightly higher isn't nearly as serious as having your plane fall out of the sky. And if only 5% of software had bugs, we'd call it one of mankind's greatest triumphs.
The only thing in this article that concerns me is this statement:
"Those two states denied his application after he failed a credit check[...]"
The government shouldn't be allowed to depend on private companies to approve or reject you in this manner, because then a company like Experian is - in a small way - deciding the law. And Experian in particular is a foreign corporation(headquartered in Ireland), so it's doubly-problematic.
Multiple government systems rely on Experian for identity verification. If you don't have credit, you don't exist in the system according to the government. I've run into this personally with healthcare.gov and state medicaid applications, as well as commercial uses like Amazon Payments.
Same. I complained about the rates I was given by my auto insurance company and they said it was because I had no credit. I told them I could easily pay 12 months up front, didn't matter. I told them I could prove my income was more than enough, didn't matter. They told me I should get a credit card.
In order to get a service I'm required to have by the government, I had to have my name in a system run by private, for profit companies.
How much is this connected to not having a real id card?
For me is always weird when you see things like "no flight lists" and it is just a list of names. In Spain or Sweden your ID will be listed and the rest of people named like you spared of being harassed.
Another concept that I don't understand is that USA's social security number has to be kept secret or otherwise your identity can be stolen. How that is even possible? Doesn't your employer needs it?
An ID card is not perfect. 40 years ago Spain issued some duplicated numbers, before computers were so prevalent, causing problems. But it solves a lot of problems.
It always seems that private and public bureaucracy in the States is worst that it needs to be.
While this makes perfect sense and works great in the rest of the world, ID numbers in the US have been talked about, but have faced resistance from two groups.. those that think that this is somehow an invasion of privacy, and those that think that this somehow correlates with the 'mark of the beast' and signals the end of humanity according to the bible. (not joking)
Individual states already issue identification cards, and people use that all the time for this purpose.
In a system like the US, I think it's better for the states to handle identification cards, not the federal government. There's a lot of details that go into identifying someone, and your local state is best equipped to handle that.
To give a few examples:
What's the procedure for changing your name? A lot of people change their name after marriage or divorce. Those are usually handled by the states, so adding a federal government in there raises the net complexity.
Should people in Alabama be able to force the residents of California to put their original sex on a federal id card? I don't care, but other people do. It could be one of those pointless political distractions that's better left unanswered.
If the federal government runs it, now they have to own or rent a bunch of land in every major city in every state so they can service id card requests. So it gives them a larger presence. I guess they could reuse social security offices, but they couldn't reuse state DMV offices which are the more natural choice.
> If the federal government runs it, now they have to own or rent a bunch of land in every major city in every state so they can service id card requests.
Don't we already have that with the post offices and the passport system?
Couldn't they expand passports into a Federal ID system?
Sure. You could require every American to get at least a passport card. Maybe even waive fees for those below a certain income level.
I'm not qualified to comment on constitutional issues so I won't.
I will say that, even if it's mostly an emotional issue (people already need at least some sort of state government-issued ID to do lots of things), there's a huge resistance in the US to anything that smells like "papers, please" or universal ID that people are required to carry and present upon request.
Which is how a lot of people view the idea of a Federal ID system. That may seem silly to a lot of people outside the US but it's how things are.
> there's a huge resistance in the US to anything that smells like "papers, please" or universal ID that people are required to carry and present upon request.
And yet, you are, under certain circumstances, already required to ID yourself to a police officer upon request.[0] The most common form of ID? Your driver's license.
> What's the procedure for changing your name? A lot of people change their name after marriage or divorce. Those are usually handled by the states, so adding a federal government in there raises the net complexity.
To be clear, the federal government is already involved with name changes-- in fact, though my name change was issued by a state court, I had to get it changed with Social Security before I could get a new driver's license.
Similarly, passports do have a sex listed, so that's already something with federal jurisdiction. The passport system is also handled through post offices, solving the problem of needing more offices.
Shared-secret numbers and physical cards are not enough. We need a cryptographic API that lets citizens sign requests to authenticate themselves, such that the signature they emit is only useful for one relying party at one time (not useful if stolen).
Fifty cryptographic APIs, on the other hand, would be a nightmare. We'd at least need the federal government to force states to implement one conforming to some open standard so that the integrations aren't intractable.
>> How much is this connected to not having a real id card?
Each state has it's own Drivers License and usually a very similar card that is simply for ID. Many places such as banks or cell phone companies will request your drivers license or ID # in addition to your Social Security # to open an account.
I suppose this depends on the state. California driver's license numbers don't change, even if you move away, get a different one, then come back years later and get one back in California.
Yeah but while you're in a different state your "current driver's license" is the one from that state. Effectively it changes when you move, and changes again when you go back.
The Congress could use its constitutional authority over weights & measures to prescribe a national system of ID numbers, administered by the states, with assignment at birth.
Another concept that I don't understand is that USA's social security number has to be kept secret or otherwise your identity can be stolen. How that is even possible? Doesn't your employer needs it?
Yes, as well as utilities, banks, insurers, hospitals, etc, etc. Treating the SSN as a password is idiotic, to the point where I almost wish Anonymous or someone would publish every American's number so that we'd be forced to stop doing it.
> If you were born before 1989, your SSN can be guessed with 44% accuracy by an algorithm.
The actual situation is quite a bit less dire than your quote.
What that linked article says is that for people born AFTER 1989, the first five digits could be guessed with 44% accuracy. (There's a very real sense that the "last 4 of your social" are less guessable than the first five, so it's no surprise that the last 4 is what is often used/misused.)
I've seen multiple databases that have the results of asking the user to enter the "last 4 of your SSN"
If you have those last 4 digits, and you can guess the first 5 digits with nearly 50% accuracy, then you have a very good chance on getting legitimate SSN's for mass numbers of people with a DB dump.
No your utilities do not need it. I never give my SSN to companies. Not the phone company, not the utility company, nobody I don't actually need to if I can help it. They will often waive such a requirement if you pay a small fee (usually around $5-50), which usually gets paid towards a bill after something like 6 months of paying everything in full on time.
There are different systems for different things. The Id card is typically verified by looking it up in a database and by a person comparing your picture.
For online usage you need digital identity cards and they have two factor or are hardware tokens.
I have not had a physical social security card in many decades. I think it was in a wallet that got stolen in the 1970s and I've never gotten a new one and never needed one (or even been asked for one that I can remember).
> How much is this connected to not having a real id card?
Social security number is sort of that. But various businesses keep accepting it blindly from fraudsters ("identity thieves"). So for now it remains semi-private because it is overused for authentication.
> Another concept that I don't understand is that USA's social security number has to be kept secret or otherwise your identity can be stolen. How that is even possible? Doesn't your employer needs it?
The trouble is really that it is accepted as a an authentication credential in many places, even though it is just a not-very-random unique number.
> Another concept that I don't understand is that USA's social security number has to be kept secret or otherwise your identity can be stolen. How that is even possible? Doesn't your employer needs it?
It doesn't make sense, but basically knowing name, date of birth, and social security number is enough to open a credit account (sometimes you have to answer some questions which would be on a credit report, or provide an ID card if you're doing it in person). This is why it's important to try to keep it secret; on the other hand, employers are required to have it for taxation purposes, as well as any creditors (including utilities) want it too; most health insurance is driven by SSN too, and so are many health records; so the number is all over the place.
Court records (the issue in this article) wouldn't normally include a social security number, so the credit agency is 'helpfully' associating those by name, maybe date of birth, and city of residence with other records in their files.
> How much is this connected to not having a real id card?
None. The credit reporting agency should be verifying any facts they intent to include in a report. If the are including unverified hearsay, the their report may be libel[1].
Also, your own ID card wouldn't fix someone else with either no ID or fraudulent ID doing something in your name. If the bank gave a loan to someone else, that's their problem, not yours.
[1] I'm aware that regulatory capture has granted the agencies immunity from slander/libel laws. Just because unethical behavior has been legalized doesn't make it the victim's responsibility to work around libelous claims.
If a bank in America gives a loan in your name that essentially is your problem until a sequence of things happen that require a fair amount of education to research and do yourself or the advice of a low end but real lawyer (which is dangerous to seek out among the ones that screw over the poor).
If you live in the US you should consider filing every block available to you so for the banks you don't use, you can start the discussions with asking why they were illegally pulling your credit record or giving credit without it.
In Europe, it looks like banks are petitioning to be allowed to verify identity over camera phones using an independent third party. That is still better than the US, since you can probably force them to retrieve that record of "you and your id" fairly early in a dispute.
One problem is that when the bank fails to adequately bet whoever they gave a loan to, it becomes your problem until you can convince them that they made a mistake (hope you can afford a lawyer). A standard ID card with a photograph would help if it meant that nobody would accept anything else (utility bills, etc. are much easier to steal or forge) and it would transform online banking if we had something like OpenID/U2F which would work online.
The other problem is that without a reliable primary key, it's much easier for correct information about different people to be incorrectly mixed. While this is not as bad as, say, when it hits a sex offender database or terrorist watch list but it does happen and would go down dramatically if everyone could just use something like a SSN as the link instead of trying various fuzzy heuristics and hoping for the best.
Every State in the US has ID cards, but citizens aren't required to obtain one at any point. (Although a heck of a lot of basic things-- driving a car on a public road, boarding an airplane, buying alcohol-- are gated by them.) What we don't have is a Federal ID card.
The TSA tried to impose one, but a lot of States are pushing back against it. (Washington State called the TSA's bluff and obtained a 2-year "extension" of our horrible awful non-TSA-approved satancards.) Even if the Feds succeed at requiring all State cards to feed into the same database, they have no power to require that every citizen obtain one.
The SSN was never intended to be ID, it's an account number. Anybody using it for ID is doing it wrong, but unfortunately, that's a heck of a lot of people.
It was supposed to a unique ID for Social Security and nothing more, but then the IRS and the Army (among others) started using it, and lots of others suddenly thought it was a good idea.
USA has prison-weapon-drug-industrial complex coupled with insane amount of money. Any power given to the government is going to screw citizens lot more than small countries like Spain.
See how British cops deal with a mentally unstable person v/s how American cops gladly shoot down an erratic teenager. That is the difference.
If USA has a real ID card and government decides to screw you up the only choice you have is to either sneak into Mexico or just kill yourself. You wont be able to find a job, drive, fly, purchase anything, have a bank account etc.
Love the fact that I can't use the automated global entry when I visit the states as there exists someone else in the world with my name and a different D.O.B..
I do still try it each time though as it's still quicker to fail and then get a wistful comment from the guy checking my passport about the issue with the system.
Err, Global Entry is a members-only program. Unless you're actually a member (or a member of a similar program in a country with a reciprocal agreement), of course you can't use those kiosks.
GE doesn't match by name and birthdate, it uses your known-traveler number.
> Another concept that I don't understand is that USA's social security number has to be kept secret or otherwise your identity can be stolen. How that is even possible? Doesn't your employer needs it?
I think adopting this framing is what makes it really bad. Your identity cannot be stolen. The whole concept of "identity theft" is bullshit intented to shift blame. It only so happens that some entities are incompetent at verifying people's identity. That shouldn't even be your problem, as you have no influence whatsoever on how others check the identity of people, so you should not in any way be responsible for dealing with the consequences if someone thinks that you owe them something just because they believed someone else's claim that they were you.
> some entities are incompetent at verifying people's identity
Some entities are incompetent at verifying identity because some people are very loud about making sure a a modern ID verification system doesn't get built, because the ability to commit fraud is a civil right or something.
We need .gov smartcards. Or at least a .gov OAuth provider. Instead we are in the dark ages of shared-secret numbers (SSN, credit card, etc) and scans/faxes of easily photoshopped printed cards.
There is an argument this should be a private responsibility. For interactions on an existing account, this makes some sense - banks should be shipping hardware tokens, for example.
The big issue with identity theft is criminals opening new accounts under other people's identities, and this is a serious problem because the government will enforce that debt against people who didn't actually incur it. IMO it is government's responsibility to demand better proof of authenticity before signing up to enforce it.
> We need .gov smartcards. Or at least a .gov OAuth provider.
That's not really a good solution either, though, because that requires trust in an essentially unverifiable system and the entity producing it.
> banks should be shipping hardware tokens, for example.
No, they absolutely should not. That's like saying banks should send out staff to take care of signing stuff for their customers, and then insisting that the government should enforce whatever their staff signed against the customer. That's a completely broken security model.
I'm not sure I really propose anything, it's a hard problem. Maybe a more decentralized web-of-trust like identity system would be a good long-term goal?
As for authenticating orders to your bank: You should be able to use any compatible product/software you like to sign orders to your bank with your private key. The bank should not have the ability to fake orders to themselves (see also the Wells-Fargo fiasco).
The most important thing about a government-level identity system is extreme difficulty of obtaining any identity other than the one you were born with. It seems inevitable in a web of trust that fraud rings would emerge to manufacture identities for those looking to escape debts, criminal convictions, etc by some combination of tricking and bribing people to sign authentications.
>You should be able to use any compatible product/software you like to sign orders to your bank with your private key
I'm not sure you should be able to use, say, a poorly written IE extension on your unpatched Windows XP machine. Something federated would be great, where any manufacturer can technically make something compatible, but it has to meet a FIPS standard or something.
Keys could be generated onboard, and then you upload your public key or something.
We're getting way ahead of ourselves - banks are extremely hesitant to use anything better than secret numbers. I'd rather a shitty 2FA implementation than that.
> It seems inevitable in a web of trust that fraud rings would emerge to manufacture identities for those looking to escape debts, criminal convictions, etc by some combination of tricking and bribing people to sign authentications.
Which could possibly be counteracted by attaching a certain amount of liability to a signature? Also, you potentially can detect fraud rings. But, as I said: I am not really proposing anything.
> I'm not sure you should be able to use, say, a poorly written IE extension on your unpatched Windows XP machine.
Yes, you should, absolutely. Not only is it impossible to enforce anything else, but that's just your own responsibility, just as locking your own home or car or whatever is your own responsibility.
> Something federated would be great, where any manufacturer can technically make something compatible, but it has to meet a FIPS standard or something.
Federated? You mean an open standard? Yes, that would be the idea. But none of the FIPS crap, that never works. Certification only prevents improvements, security fixes and the like, and usually only guarantees a minimum level of security that's worse than what would happen without it.
> Keys could be generated onboard, and then you upload your public key or something.
No, keys are generated however the customer wants to generate them. The customer supplies a public key to the bank, and it's the customer's responsibility to keep the private key secure. If they think a smartcard from a specific vendor is the solution they trust, that's fine, more power to them. If someone else trusts more their own software on an airgapped raspberry pi, they should be able to do that.
> We're getting way ahead of ourselves - banks are extremely hesitant to use anything better than secret numbers. I'd rather a shitty 2FA implementation than that.
I don't. The more technically complicated the authentication system is, the harder it is to make people, and especially courts, understand what the failure modes are, and thus, who should be liable when something goes wrong. Lists of random numbers are relatively easy to understand (especially the fact that a bank obviously knows the "secret" numbers and thus cannot really prove that they got it from you).
First of all, I wrote above you in this thread, regarding smart cards for government ID:
> That's not really a good solution either, though, because that requires trust in an essentially unverifiable system and the entity producing it.
So, maybe you want to address that instead of just pointing out that people are in fact using a system that obviously has this problem that I already mentioned.
As for why electronic voting or electronic counting of votes is a terrible idea (I would have thought everyone on here knows that by now): It's impossible to audit. Elections are the failsafe of a democracy that has to be able to remove a government from power that tries to prevent being removed, and they are about the control of huge amounts of recources. Therefore, you cannot have trust in a small minority as the basis for its reliability, you have to have a system that is very hard to corrupt even by the government. A government server counting votes is the exact opposite of that.
The fact that, so far, noone has seen any problems is completely missing the point. First of all, the whole system is set up such that it's really difficult to find out if something went wrong/was manipulated (that's just the nature of electronic voting). Secondly, most elections aren't all that problematic. In times of peace and prosperity, there usually isn't much contention over the results of an election. What makes a voting system good is when it's able to stay reliable and trusted in times of political unrest.
Thank you. I appreciate you taking the time to explain your view.
Further, I concede that you are correct as far as voting goes. That doesn't mean the card is useless. It serves other purposes quite well, even if imperfectly.
Voting obviously is the biggest problem, but other uses have similar problems. Especially in terms of how you could ever figure out if it's actually not working well. You say that it serves other purposes quite well--how do you actually know that? Is it just because noone has demonstrated yet that, I dunno, the smartcards have a backdoor that is actively being used to sign stuff in other people's names? How would you know if that were the case? How would you convince a judge that you didn't sign some document when they ask you to explain how it comes that their computer tells them that you signed it?
> How would you convince a judge that you didn't sign some document when they ask you to explain how it comes that their computer tells them that you signed it?
How would you convince a judge that someone was holding a gun to your head as you signed a document?
How would you convince a judge that you didn't sign something when they ask you to explain how it comes that the signature on the document matches yours exactly?
The thing is that both of those scenarios are things judges can be expected to understand perfectly well, and have some clue how to approach evaluating the claim, and also, in both cases, there generally is a reasonable risk that any such attempts leave some form of evidence, deterring people from even trying it.
With a smartcard, there is nothing of that sort. It's just a bunch of electronic numbers and "the blackbox says you signed it!", there isn't really anything there to investigate, plus judges can in general be expected to not have even the slightest clue how to evaluate claims about IT security, so more than likely you'll end up with a situation where judges simply accept the government-mandated assumption that what the blackbox says is to be trusted.
It's the same fundamental problem as with electronic elections: The actual process is necessarily completely removed from human perception/observation, and therefore ultimately must be trusted blindly if it's not to be rejected outright.
The credit reporting system probably wouldn't work if you had to have the account holder's 'permission' to add events to it - you have to do it in this automated way.
Although it can be a pain, the responsibility of if your credit report is accurate falls on you, the consumer. You should many of the free services to check your credit and then dispute any events that aren't correct. Most people don't have issues but you can have companies that don't report payoffs (they should be fined or something), companies that assign accounts to the wrong person/SSN, etc.
You can also get free reports through (some) banks and credit cards - Bank of America now provides members an updated FICO score every month and emails a link to access it. One if my credit cards has the same service but I cannot pinpoint which one right now.
Although it can be a pain, the responsibility of if your credit report is accurate falls on you, the consumer.
I can only be responsible for the things I do. If some shithead wants to give third-party information about me it better be accurate, and if its inaccuracy causes me harm it should be actionable.
Probably with carefully written laws, same as why we are seeing bogus DMCA requests all the time. Most crime has to be committed "knowingly", but if you automate your DMCA takedowns they can't catch you for perjury because you don't know what your system does.
If a creditor incorrectly reports a debt after writing to the creditor and credit reporting company you can sue them under the FCRA for actual damages or the statutory $1000 per violation.
I don't know how it works today, but back when I was 20-something it was good advice to dispute anything negative on your credit report, because a lot of companies wouldn't bother responding by the deadline. I had a friend who made a defaulted mortgage disappear that way.
I've had bad/wrong info on my reports in the past and it took years to get the stuff removed. There is no transparency to the process and the process seems completely arbitrary.
This sounds pretty similar to DCMA reporting. When responsibility for error correction doesn't fall on the person making the error there will be more errors, especially in an automation system because there is no incentive to sanity check. In both of these cases, the person harmed is blamed for not monitoring an a third parties automated system for errors. Users now need a way to automate the monitoring/dispute process.
I don't think the fact that the process is automated is a problem (and I don't see anyone saying so). The problem is that existing algorithms are bad (like in the article where an algorithm decided two people are the same based on name and year of birth alone, when all other factors speak against it) and that complaints are not handled properly,
[from the article]
> the defendant, unsurprisingly, had the same legal first name, last name and middle initial. We were also both born in 1987. But our similarities end there: He has half a dozen convictions. He’s black. He’s currently incarcerated. And an arrest warrant indicated that he was homeless
> when all other factors speak against it
Given that the agency thinks they're the same person, the number of convictions is irrelevant. A credit agency has no knowledge of skin color. I'm not sure that a credit agency would know if someone was incarcerated -- their accounts could still be active and paid for by someone else. Credit agencies keep track of residence addresses, but would likely assume that he was at his last know address.
I think the root of the problem is getting a criminal background check and a credit report from the same place. The quality of information is quite a bit different, but the expectation is different.
For a criminal background check, I would expect false matches because the lookup is realistically based n name and date of birth only. As a result, I'd want to know additional information, such as mug shots, and current status (incarcerated, on parole, etc) to confirm if the person with the record was the person in front of me.
>I'm not sure that a credit agency would know if someone was incarcerated
I would assume they can get this information, considering that some reporter seemed to be able to get this information easily.
Making hard decisions on wether two people are the same is hard. But that's exactly why "name and year of birth match" seems like a naive algorithm. I would expect a match probability based on the treasure trove of statistical data that these agencies possess. A person that is currently incarcerated is less likely to be the same person that is currently spending and earning money, and for which landlords request reports. Skin color is strongly correlated to place of residence: if you know (automatically or manually detected from a mugshot) that one person is black, you can get the statistical probablility that the other person is black from the neighbourhood he lives in. etc.
>I think the root of the problem is getting a criminal background check and a credit report from the same place.
I agree that this is also not optimal. In Europe this type of information is obtained by requiring a criminal record certificate, a certificate anyone can get from a police station to show their (lack of) criminal record.
Actually, there's only one legitimate free service that was mandated by a settlement with the Government. The rest have confusingly similar names that all try to scam you. (Shamefully, the government didn't provide for a .gov domain for the legitimate access to the free service.)
You're only referring to credit reports... did you read the article? This wasn't only a credit report, but a landlord profiling service that they provide that also gives your criminal history... how, do you suppose, are we to monitor _what they see_ as our criminal histories?
I've had this exact same thing happen to me, about 6 years ago, when applying for an apartment lease. The landlord called me to ask about the violent offenses (robbery, assault) that came back on my background check that she was _sure_ couldn't be me. How am I supposed to monitor that? And, how would I do that _at no cost to me_?
Are you saying the responsibility falls on the consumer in the factual sense or the moral sense? I mean, that it falls on the consumer in fact seem obvious, but I don't agree that it does morally. I think the person or group that makes he mistakes are morally responsible.
This wasn't a credit report, though... This was a background check service. There was no way for the consumer to proactively check it and correct errors.
The whole credit reporting system is a money making racket and there is zero interest in keeping the information in it accurate. No one is held responsible for mistakes and the suffering people go thought because of it.
Same goes for every credit rating agency in the country (world?). Remember all those AAA rated swaps?
It is disturbing how the entire economic system is set up to make life harder on those it's hardest on. Poor, in debt, barely making ends meet? You're lucky if you can get a credit card for under 30% APR. Mortgage rates historically low? Not for you. Need a loan? Sucks to be you.
Finally clawed your way out of debt, trying to get ahead? Tough shit, your credit report will haunt you for the better part of a decade.
> Poor, in debt, barely making ends meet? You're lucky if you can get a credit card for under 30% APR.
What about that doesn't make sense? The person you described carries an incredibly high default risk.
If credit scores are unfair to the poor, it's because they don't provide accessible way to fix errors. If your credit score is low because you're in excessive debt and unlikely to pay it off, then the credit scoring system is doing its job.
I don't think they're saying it doesn't make sense.
The point is, we help those that don't need help, and hurt those that are already hurting. We give better rates to people with high credit scores, but people with low ones probably need it more. It can turn into a feedback loop where the only way out is some form of outside help.
Credit scores are not a charity mechanism; they are a way of estimating someone's default risk. People with low credit scores don't get high loan rates because their credit scores are low; they get high loan rates because they're probably extremely risky borrowers. If you want to help poor people, the way to do that is not to ask banks to take on irrational risk for no good reason. In fact, making loans more accessible to people who are in bad debt might actually be actively bad for them.
They are generally just as accessible to people, just at a higher APR. Certain states passed predatory lending laws a long time ago but the US federal government smacked them down. There's a reason why all the national credit card companies have their headquarters in the same couple of states.
Beyond that, credit cards can adjust the APR on existing balances.
Which honest hardworking person shoulders the burden when the federal reserve poofs a billion dollars into existence? Why no outrage over that, but we complain about those who default when the default rate is priced into a financial product's APR and profit margin?
There is plenty of outrage over that and all sorts of other things, just not enough to change the way things are. Too many interests, too-many individuals with their entire lives and mindsets invested in the way things work at the moment. As someone that advocates less state-involvement at all levels, I find it incredibly frustrating to watch day to day things unfolding. Every single facet of our lives is affected and skewed by the state in one way or another. Sometimes in a good, and sometimes in a bad way.
Credit reporting system works pretty well and it is evident by the fact that we have seen mortgage bubble burst (where government forced banks to ignore credit ratings) and student loan bubble building up (ditto as housing loans).
The marginal gain in making it more accurate is not very much so I am pretty sure banks will not put efforts in that direction. Also, banks don't care if 1 in 10000 get screwed up because of their mistake because there is plenty of more fish in the pond. But that is how the world works.
Can you elaborate on your point about government force? My understanding was that Moodys and S&P aggregated poorly rated mortgages and then gave arbitrarily high ratings as a whole. This of course created perverse incentives to sell mortgages to people with bad or no credit ratings whatsoever, as long as they could be repackaged and sold upwards.
The error rate is far higher than 1 in 10000. More like 1 in 4, and 1 in 20 with serious errors.
The credit rating idea was born out of the Southern morality culture. "Are they good people? Let's put a number on it and sell it!"
The flip side of that is that they can't possibly be wrong unless you prove it, and even then, they're so butt hurt that you called them out on it that they'll take their time fixing it, if ever. The idea is that they're right, you're wrong, and they have powerful friends who protect them from being sued for slander.
> (where government forced banks to ignore credit ratings)
This is simply not true. The mortgage bubble burst when big investment and gambling/speculation institutions could no longer cover the shorts against mortgage bond derivatives and the incentive for packaging questionable mortgages into the underlyings disappeared. These mortgages weren't all (or even mostly) to poor people with no ability to pay, and the government didn't force anybody to do anything.
These same banks paid ratings agencies to ignore the bad mortgages in these securities specifically so they could increase the volume of mortgage bond sales. So your example is actually one that shows that ratings agencies' products are not necessarily accurate (some might call them fraudulent, even).
I've read a fair amount about the 2007 bubble, but i don't recall anything about this,
> where government forced banks to ignore credit ratings
I was under the impression that subprime was keenly aware of credit ratings, subprime is defined as failure to meet the Fannie May and Freddie Mac standards. The CRA excluded race and gender as loan criteria, leaving credit rating as the goto.
There's lots about banks like countrywide ignoring credit rating, but i can't find anything where the government required ignoring the credit rating. Could you help me out with a link?
I would hope the entities purchasing the credit reports (landlords, employers, whomever) would care about their accuracy but usually this doesn't seem to be the case. From what I've seen any false negatives around bad credit just ends up in a person being passed upon during evaluation as a tenant or employee and nobody follows up with the ratings agencies.
When you see that happening, please urge the affected to correct the record and to take to court any entity that makes decisions off the false information. Fees and penalties can be recovered and awarded.
So do you have a suggestion for a system that works better, or do you prefer banks lend the money from your savings account without any sort of evaluation of how likely it is to be paid back?
I don't think the credit score itself is the problem, it's that it's the only thing banks use. There is no discretion for cases where the mode doesn't have enough information.
As one example that has affected me, I moved to the US a year ago. Go to buy a used car last month with bank statements showing a good salary and enough cash to buy the vehicle outright, a check for 1/3 of the car price, and phone numbers of my employer and landlord. All the banks the finance department contacted automatically denied me without looking at the stuff I brought.
I went to my local bank branch thinking a human might help. I got automatically denied, the manager tried to escalate given the information I provided, but I was still denied.
In the end my loan was through the car manufacturer at a fairly high rate.
I realize I am fortunate in that I can afford to take a crappy loan solely to build a credit history and play this silly game. But the way the model is used treats people who are new to obtaining US credit and people who have used credit terribly virtually identically.
The problem is of course that these decisions have to be made consistently across the country, and the banks don't want to try on the "gut feel" of some random bank manager. Of course the system/criteria could be improved, but wanting consistency is not surprising.
Anyway, I had a similar issue with car loans when moving to the US. I've since realized that it's pretty trivial to increase your credit score if you pay a small amount of attention to it. Simply sign up for credit karma, get a few no annul fee credit cards, and put a small purchase on them every few months so that they don't get closed due to inactivity. Within 12 months your credit score will be stellar.
It's a blessing and a curse. Yes, if you've recently moved to the U.S., then you are screwed for your first year or two - need to get a secured credit card, and everything will be a hassle without credit history. Nobody will care about your salary, bank statements, assets or anything.
But then, after 3-4 years, it's pretty damn convenient not needing to mess around with lengthy applications for credit (except for possibly on a mortgage), and having a credit reputation that's completely portable across providers.
It pretty much makes sense that newly arrived residents are a corner case that isn't worth worrying about too much for the banks and credit reporting agencies - at any given time, the number of residents who have been here for less than, say, 2 years is going to be a pretty small, somewhat risky part of the market (less assets in the country, more likely to leave).
The banks have a profit motive for assessing credit risk accurately. They are the ones who make money if this is done right. So why don't the banks pay for it? Why are we subsidizing the banks' business model by paying for credit reports at all? I don't have to pay if I want to receive more than one bank account statement per year, and bank accounts are another product the bank uses to make money off of me, just like loans.
The banks have a profit motive for assessing credit risk accurately.
They have a clear incentive to not underestimate prospective borrowers' credit risk (or they'll lose more in defaults than they gain in interest), but the only incentive to not overestimate someone's credit risk is that someone else might offer a loan on better terms. Even if they are aware of flaws in their assessment process that overestimate a borrower's risk, they probably feel safe in the knowledge that everyone else is using that same process and will overestimate risk in the same way. A more accurate credit assessor could profit from this situation ("get your credit reports from us, and you can undercut lenders who rely on the big three"), but the barrier to entry is rather high.
1. Signup for https://www.creditkarma.com. Yes, you can argue about giving your credentials to a 3rd party company and they show you ads but credit karma sends me real time activity on my credit report FOR FREE. I get offers etc but I am happy since I can keep an eye on my credit report from all agencies. (except Experian who want you to pay them for report).
3. Get your FICO score from discover [0] for free OR Open a credit card with Citi cards [1] and I think for $95/Year fee, they give you free FICO score which is the score that majority of lenders use. There are many other companies that offer FICO score for a fee but this was a good way for me since I needed that type of card anyway.
4. Check your credit card and bank statements every few days. I do it once a week. It is a good habit. For this step, do it manually. Don't rely on mint or tools like that. Check the transactions manually.
5. Setup alerts with your bank/credit card for transactions with a certain threshold. For example, I have alerts for anything over $10. For under $10, see Step 4. This is another step in case you do have a fraud.
5. Don't give out your SSN or credit information to anyone unless absolutely sure. Never give these on a phone call with any company unless you know that you called that company and they need the info (example: health insurance etc).
6. If you ever get a call from a Collection Agency, do not give them your information right away. Lot of collection calls are plain fraud or incorrect. Ask them to send a letter with details (genuine ones will do anyway). Read this from FTC about debt collection to educate yourself
Well, just went to pull my Experian report. It works, but it's certainly less than optimal.
TransUnion and Equifax give you PDFs of your report that you can easily download. Experian just shows you an HTML document. There's a "printer friendly" version, but the only thing that's really different is they removed the navigation and the "Dispute" buttons that are listed next to every item.
On top of that, there's a position:fixed header on the print friendly document, which most browsers will render once on every page. In this case, that causes information at the top of each page of the report to be covered up. I was able to use Chrome's DOM inspector to set it to position:static and then Print > Save as PDF, but it really shouldn't be that hard.
> 3. Get your FICO score from discover [0] for free OR Open a credit card with Citi cards [1] and I think for $95/Year fee, they give you free FICO score which is the score that majority of lenders use. There are many other companies that offer FICO score for a fee but this was a good way for me since I needed that type of card anyway.
As well as Discover, Barclays and USAA credit cards both offer (one of) your credit scores without paying an annual fee.
All this to just keep your record clean and not have your bank misplace your money?
These are things you should not have to worry about in life.
They are expected and in most modern countries are not something you need to worry about.
When I tell my friends about this in the US at first they don't believe me. The can't believe that the banks make so many mistakes (such as credit/debit the wrong person for a check) and that there is this thing called a credit score which you have very little control over and can ruin you without you doing anything wrong.
The amount of time I have wasted in fixing credit scores and dealing with overdraft fees because someone else's check was pulled on the wrong account is staggering.
Unfortunately, yes you need to do all these otherwise there is a risk that you have something on your credit report and you will never know. I hate the system too but right now, this is what it is.
should isn't a useful word when you're deciding what to actually do. If you want to change the status quo, start working to change it. But in the meantime you have to pay attention and look after your properties.
I have calendar reminders set four months apart to get and review credit reports, going round-robin through credit agencies. This gets me a (free) credit report 3 times a year.
I have a Citi Doublecash with no annual fee and they provide a credit score. Been with them for many years though so your eligibility may vary.
In California at least you can "security freeze" your credit reports so no one can apply for credit in your name. You have to temporarily "unfreeze" them (with a pin code) for someone to get a report. I was a victim of identity theft many years ago (from an employee in my company no less), and while I didn't loose any money, it was a huge hassle to straighten it out. If you don't regularly need services that require a credit report freezing them is much simpler than monitoring the credit agency. I did this many years ago and it really is a lot simpler solution in my opinion than constant monitoring.
Incidentally when I was an identity theft victim they didn't remove the incorrect information, they just said the fraudulent credit cards were "never late" and thus would not affect my score. I thought that was lame.
They need to be held criminally and civilly liable for promoting lies about a specific person with the specific intent to cause harm to that person.
There's a similar problem with Google. I have the same name (and it's not that common) and same age as a disbarred attorney in Arizona.
I always wonder how many times a new contact, or potential business partner, googles my name, finds the disbarred lawyer who was prosecuted for tax evasion, and decides not to do business with me. This wouldn't be a case of mis-information, but just of sloppy research.
Here's something I've wanted to know for a while: How is a foreigner emigrating to the USA (or Canada I guess) supposed to function? We don't use credit cards in my country (we use direct debit cards) and I've never had any debt to my name. On the other hand, I've always paid all my bills on time. Do you get some sort of crappy default credit score given based on estimated factors, or are you SOL until you've lived long enough to establish a credit history?
Some credit card companies issue secured credit cards: they basically request a payment of e.g. 1000$ called security deposit and keep it in escrow (I think. IANAL) and in return they give you a credit card with a credit limit of 1000$. If you don't pay your credit card bills, they will cancel the credit card and use the security deposit to pay off the remaining balance. If you do pay all your bills on time, they release the security deposit after 6 months to 2 years based on the issuer. At this point you will have a credit report showing several months of prompt payment and a reasonable score.
It is not perfect, but it is not that bad. It sucks having to have your money blocked in an account for a year though.
For instance: Time Warner Cable screwed up my cable package, charging me 220$ (a la carte) rather than 90$ (bundle). I contacted them, they admitted the mistake, and fixed the next month---I still ended up out 65$. I'd really like that money (moral imperative), but there's no legal way for me to seek relief for that small amount. If TWC messes up 1/50 accounts, once a year, for 50$, then they stand to make 500k--1mm$ a year just in my area. There's literally profit to be had between the legal cracks.
I know nothing about law, but I would think a class action lawyer could do a monthly or quarterly (or how ever long it takes for critical mass to be achieved) case on that and make decent recurring income I bet. Provide a site where folks can dispute their charge, and get back 50% of the disputed amount after the case is settled. Every month, the lawyer brings the same case against the "big guy" but with a new list of plaintiffs.
Sounds similar to the Sprint class action lawsuit where customers were being charged minor amounts of extra money, but in aggregate it added up to a ton. Sprint lost that case and lost millions.
File a complaint with the FCC or BBB and (at least with Comcast) they'll suddenly be very eager to fix the problem. Ran into a similar issue where I was told one thing and billed for another, a few days after a BBB complaint they had someone from "executive customer relations" calling/emailing me to get it resolved ASAP.
The BBB is not a government agency, it is a private company that works for large businesses. Members of the BBB (such as Comcast) can pay the BBB to mark complaints as resolved, without resolving them.
FCC yes... I did that when I had an issue with AT&T not wanting to unlock a phone that I just bought (pre-paid) and I got a call from AT&T the next day.
I'm beginning to think one of the biggest causes of all this crap in the US is the "American rule" regarding legal costs. Even if you win, you still lose unless it was a massive case. Stupid.
If a credit reporting agency has incorrectly linked my profile with unsavory data, I do believe I'd skip straight past FCRA violation and go straight to a defamation lawsuit. This is libel.
When I turned 18, I decided that it would be a good idea to get a credit report from all three agencies just to check what was on there. I found that there were multiple accounts tied to my credit score from before I was born. Two of the credit agencies removed them fairly easily, but to this day, one of them has refused to remove the accounts. Why? Because I can't prove that I did not live in the area the account was opened in. Not being born yet has so far not been good enough. It's just been a process of me mailing them, waiting 6 months for them to respond with some request for some more information, repeat.
The only reason why I haven't done that, is that the accounts actually have a positive impact on my credit. They're fraudulent, so I am taking action to remove them, but there have been no damages as a result. So, I don't really have a reason to sue other than to save me future hassle.
Speaking of credit annoyances, I've seen a lot of "dark patterns" appearing on the credit agency websites for ordering your Federally-mandated free annual credit report. Their workflow for getting the credit report is structured to push you towards signing up for some kind of monthly subscription to some monitoring service, to the point where it's very difficult to find the buttons to just get the free credit report. And if you do accidentally sign up for their monthly service, of course you can only cancel over the phone during business hours. Just waiting for them to start understaffing these call centers so that the waits extend past an hour...
If you accidentally sign up for a monthly subscription, call your credit card company and tell them never to pay it and to charge back any fees, because it was too difficult to cancel.
UK credit score provider Experian used to rely on dark patterns[1] but seems to have moved towards offering consumer finance price comparison services with the useful side benefit of being able to search for stuff you'll be approved for. (I doubt they get many signups for the £14.99 a month "premium" service now they're pushing the free one alongside it)
I can't think of many more unconscionable models for a secondary revenue stream than targeting people who are insecure about their finances and bad at reading small print and trying to get them to pay nearly 100x the price they need to pay for information for some extras they're unlikely to use.
[1]in the UK they're actually allowed to charge a small one-off handling fee of up to £2 if you request your credit store. But "free" plus a large recurring charge for bundled extra data if you don't cancel within 30 days was more profitable...
I just signed up and they advertised that it cost $1 to get a report.
BUT they sign you up for a $22 / mo service. It is not very obvious that they did this, and it's somewhat difficult to deactivate your account. (I imagine people here wouldn't have a problem, but I'm imagining the average person here).
The US is as far as I know the only country in the world who have a positive creditscore system.
At least in Europe it's mostly based on a negative creditscore i.e. you are trusted by definition but if you don't pay your bills you end up not being allowed access to credit.
In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off.
This is obviously to say the least absurdly backwards, but I believe there is a rational explanation and that is that the US is a country of immigration and so you had to find a way to allow foreign people without any history and no reason to trust them.
I'm curious why you think that is absurdly backwards. Not necessarily disagreeing, but it's not hard to justify wanting to see a history of repayment vs trusting by default.
It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house.
You could instead just look at the history of their debit card usage to figure out whether they are trustworthy.
As I said though I understand why they do it, it's just not a very useful model IMHO but because it's big money and it's complex to change it most probably wont for now.
>It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house.
I don't think it's backwards. Debt is only a bad thing if you're being irresponsible about it, so it's like a weedout test. In the other system, can you just buy a house on credit with no credit history? If so, I just find that hard to comprehend.
Also, re: your comment about foreign people, my dad had no issue with it, but maybe you're saying people that are not yet citizens?
I think the way we do it in the states is reasonable enough. I wouldn't expect any person outside of those that are gambling to loan money without building up trust first. If you're making minimum wage and don't have a lot in assets you're not going to have a lot of available credit.
A lot of people don't realize this I think but if you hold a balance, especially over whatever percent of your total credit, it hurts. The moment I paid off all my cards my credit score jumped and all my limits increased.
> It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money
Citation required because debt is not the same thing as money, so associating them together like you do with your assertion requires something more than just your illogical statement.
It's ironic how completely oblivious many of you are of your own system.
I live in the US and I grew up in Denmark.
Both systems allowed me to have credit cards, rent apartments, buy a car etc, but only the US system forced me to do that by creating debt to show that I could be trusted with debt.
In other words large parts of the world do in fact associate them and aren't like us in the US debt ridden.
The trust by default model was tried with driver's licenses. Give one to everybody. Result: lots of accidents. Most states have now switched policies and require a year of driving with a provisional license. Result: fewer accidents.
If we want to avoid debt "accidents", only letting people with demonstrated experience seems like a good solution.
I didn't even hear about that. That's interesting. It reminds me of what we used to joke as solution to reduce malware and bots on the net: license for using a computer online for at least basic, precautionary measures with disconnects or something like that if they do dumb things. Congress still not taking action on that but I'm glad situation with driving improved.
Good point, when I got my licence the criteria was slightly more than having a pulse. My teenage peers racked up speeding tickets without a slap on the wrist. Nowadays there's all sorts of requirements there wasn't before and if a 16 year old got a speeding ticket it would be a much harsher penality than just paying the fine like you do at 25.
It turns out that age matters a hell of a lot, independent even of experience. Teenagers are horrific insurance risks.
A provisional license offers both supervised training and effectively delays entry into the unsupervised insurance pool by a year.
After this, location (e.g., ZIP Code, in the US) and miles driven are the biggest predictors. Latter are why insurance companies will do almost anything to get ahold of odometer readings.
That's not quite accurate, almost any secured or subprime credit card will have activity requirements. Most will close your account if there's insufficient transactions in the last three months.
I am foreigner. My first CC had a $49 yearly fee and something like 39% APR. I always paid it off and after a year other offers came. So the cost was $49 to get a credit history.
(They'll probably close your account in a year of inactivity if you don't use it but you'll still have credit history until the account falls off your report-10 years)
> It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money and I would question the validity of seeing people paying back limited debt to be indicative of ex. borrowing for a house.
First of all, you can have an excellent credit score without paying a penny of interest. All you have to do is buy things with your credit card, and pay the bill in full when it arrives. You will never pay any interest when you do this.
Second, the people who measure risk for a living have determined that people's history with small amounts of debt is indicative of their ability to manage larger amounts of debt. Do you think their actuarial models are incorrect, and if so, why?
Furthermore, it's not like a good credit score is all it takes to get a mortgage. Proof of income matters too. As anyone who bought a house since the 2008 debacle will tell you, mortgage lenders take great pains to verify borrowers' income and the source of the money they use for their down payment.
> You could instead just look at the history of their debit card usage to figure out whether they are trustworthy.
No, you really can't. A debit transaction is a direct deduction of money from a checking account -- it is not debt. The only thing that can go wrong is an overdraft, and even when that happens, the payee will probably be unaware of it. Debit is more similar to cash than it is to credit. People have very different psychology and behavior when they use debt instead of cash.
There are plenty of problems with the credit system in the US, but the things you have identified as problems are not real problems.
First of all. Yes you can have an excellent credit score without paying a penny of interest, but the second you use it you are by definition in debt. Whether there is interest is besides the point. You can't just decide not to pay it back. And most people don't use it like that which is why it's such a good business.
Second it's a fairly know issue that the way creditscore is established is pretty flawed. You can have 10mio on your account, but if you have no job or own your own company it will actually affect your credit score. This whole thread is started because of some of the issues.
With regards to the debit card the point is that the kind of purchases you did before you got a credit card, aren't going to change dramatically or fundamentally after you get one.
> You can have 10mio on your account, but if you have no job or own your own company it will actually affect your credit score.
That's not true. Your FICO score does not take into account your employment status, nor your income.
> With regards to the debit card the point is that the kind of purchases you did before you got a credit card, aren't going to change dramatically or fundamentally after you get one.
If that were true, it would contradict your earlier argument that "most people don't use it like that which is why it's such a good business." Your statements cannot both be true.
>It's absurdly backwards because it's asking you to create debt which normally is the opposite of showing you are good with money
The American economy, and largely the world economy is based on accusation of debt.
If everyone in the US, or other First world nations simply started living with in their means, never incurring debt the entire of the world economy was cease.
Thus the credit system is design to reward people that acquire more and more debt and punish people that save or live frugal life styles with in their means
The modern economy depends on a person gathering debt from their 18th birthday until their death, where the assets of their life are then sold to cover those debts ensuring the next generation also has to acquire debt repeating the cycle.
I don't think this is the cause, but it does appear to be a virtuous feedback cycle: the creation of debt must continue for the economy to function. Practically forcing people to create debt allows the system to continue.
I felt pretty "trusted by definition." Citi gave me a credit card with a $3,000 limit as a college freshmen. A few years later I had an $8,000 limit card and a $10,000 limit card.
I bought my car certified-pre-owned under a program that writes favorable low-cost loans to recent college graduates with no or limited credit history (with an offer letter or paystubs).
You just aren't trusted with housing-sized amounts of money until you demonstrate responsibility with smaller dollar values first.
>basically creating debt and then paying it off
This depends on your definitions a little bit. You don't need to carry a balance and you certainly don't need to pay interest. You just need to create low but nonzero utilization on a credit card, pay it off every month, and not do anything else that might screw up your credit. I suppose you have debt in the interim between making the charge and paying it off, but most people don't consider it to be "credit card debt" if it goes away between statement cycles.
How do my parent's credit history have anything to do with my credit history in the US? Are you talking about co-signing for loans or possibly how a child can get a card under their parents' name? I didn't think either of those had any impact on the child's credit score.
Given what I hear about US banks, this seems like a most obvious variable to include in computing the credit score. Which leads me to my question - is there an official/exhaustive list of what exactly is considered and how, or is that a banking secret?
- Credit card utilization (balance as a percentage of available credit at last statement close)
- On-time payments (you just have to pay the minimum required by the date specified for it to count)
- Derogatory marks (collections, bankruptcies, foreclosures and liens)
- Average age of accounts (this favors older people who have been using credit a long time but not opening a lot of accounts recently)
- Total number of accounts (also rewards a mixture of types - car, student, credit card, mortgage, etc)
- Hard inquiries (very slightly dings your score if you're currently looking for credit, punishes you harder if you're desperately applying to everything you can find because this indicates financial emergency and therefore high risk).
The exact FICO algorithm is proprietary. They do give some information about what it entails.
I am in no way affiliated with freecreditreport.com, it's just a site I find incredibly useful. It's now owned by Experian and it gives you your Experian FICO 8 credit score. They break down each part of your credit score and grade you on each. (A-F)
There's other sites like credit karma that do similar but they use vantage score which is also known as FAKO score and isn't used by lenders but is a good indication of what your FICO score may be.
I am well aware of that and I never claimed it did. I wasn't talking about credit history but about history as in, a customer in a bank for years. These are also factors for how easy/hard things like this is.
This has nothing to do with your credit report or your credit history.
This has to do with your chance of getting a credit card to begin with. There is a difference between being a US citizen having had bank account most of your life and then being a foreigner who just got yours.
Not sure why you keep insisting I am saying something else than I am.
If you have a very long history with a bank, however, that might factor into that bank's decision in giving you a credit card. Nothing stops banks from combining credit score data with other sources.
As a personal anecdote, I avoided credit cards until age 31, but had a bank account with Wells Fargo since I was 16. Because I had no history, almost no one wanted to give me a card despite my high provable income. I got my first credit card with capital one (for a hilarious 300 dollar limit).
But two months later after I became a known credit card user I started getting credit card offers in the mail from a variety of sources -- Wells Fargo offered me considerably more credit than the others, presumably because some system of theirs thought I was more trustworthy (long-standing account history? Actual visible income in the bank account?) They even offered me a rewards card even though I only had 1 month of history.
> You are american you have a history and your parents have a history.
Parents have nothing to do with anything unless your parents cosign or add you as an authorized user on their cards. Being American has nothing to do with anything other than some cards require you to be a US citizen for some reason, my BVAA card does for example. My parents are scumbags and their scummy-iness doesn't effect my ability to build credit.
The trick is to apply for the right card, different lenders/products target different populations. A store card or a secured card is a good start in building credit, that's what I did when I was young and had practically zero income. My limit was like $300 but it was enough to get me on the map. I didn't have to deal with being rejected because I applied for the product that fits my life situation. If you just apply for the heavily advertised cards you are not going to get a good result. After that I applied for a crappy card I was "pre-approved" for that came in the mail. Once you have a credit history you're going to get offers in the mail unless you opt-out.
Getting a charge card (which is not the same as a credit card) may be an option too, not sure on that one.
>The question is not about your credit score but about getting the credit card to begin with. Once you get the card they assign you a credit score but in order to get it you have to start building debt (and as a foreigner I had to do that with my own money)
False, you don't have to have any debt to get a credit score. Having credit available to you you don't use is enough.
First you say
>You are asked about assets, income etc. but those things have very little effect on whether you get a credit card or not.
Then you say:
>I wasn't talking about credit history but about history as in, a customer in a bank for years. These are also factors for how easy/hard things like this is.... There is a difference between being a US citizen having had bank account most of your life and then being a foreigner who just got yours.
Those things are mutually exclusive and both can't be correct.
>There are plenty of other ways to credit companies could gauge inside your economic maturity as much of your financial history have been done via debit card for more or less the same transactions that you are going to use your credit card for... You are not suddenly going to become financially irresponsible just because you get credit
This is beyond false and laughable. Nobody gives two craps about "economic maturity" they want to know "is this person likely to pay back the loan?"
>Second it's a fairly know issue that the way creditscore is established is pretty flawed.
It has its limits but are you questioning actuaries that crunch these numbers for a living? I mean, I'm assuming they have a reason and numbers and there's data to back it up and they just didn't say "lol, lets make up some shit." If they were getting bad results and losing money they'd change the algorithm.
> I live in the US so yes I have a pretty good idea of how it works.
Almost no Americans have any idea how "the system" works, its very specificity knowledge and there's tons of myths. You know how many times I've heard people say "my credit is terrible, its around 750?" 750 is an excellent score. People get credit reports confused with credit scores and all kinds of "I heard," "I assume," etc.
But it's also true that if you come to the US during or after college, banks will not issue you a credit card.
Instead, they will issue you a 'secured' credit card, where you get a $300-500 limit on a card against the same amount paid to the bank as security. Only after a year or 2 of this, will the bank actually issue credit.
Maybe you had an account/history with the bank for a while, and that made a difference?
That isn't just immigrants: Plenty of young, non-college bound students have only access to such cards. Americans also use them after bankruptcy to try to help strengthen their credit scores.
You and your parents history in the US in general can have a an affect on whether you can convince a bank to give you a credit card or not not on the credit score.
I am not talking about credit card history but about history of being a US citizen, having a bank account etc.
I think a lot here are missing the point.
The question is not about your credit score but about getting the credit card to begin with. Once you get the card they assign you a credit score but in order to get it you have to start building debt (and as a foreigner I had to do that with my own money)
Ok, here is the thing. Your parents credit score doesn't affect yours. At all. IT doesn't help you get a credit card, nor bank accounts.
Unless: Someone has them cosign for a loan or credit card. This is somewhat common with a first car loan or some student loans, but less common with credit cards. They won't be able to do that if they have a low score.
Otherwise, you are basically on your own. The credit stuff you would have experienced coming here is what many 18-year olds hav to deal with. Some older women find themselves in a similar position - the accounts were all in their husband's name.
>Your parents credit score doesn't affect yours. At all. IT doesn't help you get a credit card, nor bank accounts.
Perhaps one's parents can't help in any formal way, but for me, my parents' creditworthiness and relationship with a local bank helped get me my first credit card.
Right before I left home for college, I applied for a credit card with my local bank, and was initially declined. When I asked for reconsideration by the branch manager, he looked into the situation and indicated that he couldn't do anything to assist.
When my mother found out I was declined, she took me back to the branch, and asked the branch manger to reconsider the credit decision. Upon a review of my parents' standing with the bank, the branch manager overrode the previous decision and I was given a Visa card with a moderate ($1000 USD) limit. My mother wasn't even asked to co-sign on the account, provide any kind of guarantee, or be associated with the credit card in any way.
With regards to credit score, of course, I never said it did.
With regards to getting a first credit card thats simply not true. Maybe if you go into a bank and open an account but if you have had a relationship with that bank for several years it is going to help you get one to begin with. Of course it helps you if you have had a history with the bank. And of course there are americans who can't just get a credit card thats still not what I am talking about.
I know plenty of 18 year olds who never had to deal with what I had and no matter what it doesn't really change anything from my original claim which is that the US credit history system is built on distrust not trust.
Citibank offers customers credit cards based on how much they have on their savings account. So it's simply not true that history doesn't help. Of course it does as it should.
No, no, no. Your parents history doesn't affect you in such a way!!!! (Unless you live with them and only in very certain ways) Thank God because my parents are scumbags. My dad is flagged in car insurance databases. When I get a car insurance quote they ask me "who is [my dad]?" I say "he's my dad and I don't live with him and he doesn't have access to my car." They say "OK" and we move on.
You also don't have to start building debt. Having a credit card you don't use is enough.
It sounds like you are at least ten years out of college. Federal regulations have changed and now it is more difficult for a college student to access credit cards
I work for Capital One and their target customer is actually people without credit scores. As far as I know, it's the only company that actually targets these customers as the primary revenue stream and also makes money.
The way it works, is they usually only give someone a $500 limit, then double the limit every 6 months If you pay monthly.
Once you get a job you can get a bump to $2000 limit with the 1.5% back easy. You just need to get a job for that.
I'm 1.5 years out of college and have access to ~100k in credit cards with a score of 750. I started with a score of 540 1.5 years ago. It's really not hard at all.
Even if you're very flush it's handy to have the ability to use a credit card for a transaction because your checkbook is at home. Maybe you want to buy something and then sell some stock when you get home to pay for it? Credit is handy when you don't need it. I would imagine :)
Speaking only for myself, my total credit limits are huge because my wife likes signing up for new cards to take advantage of special offers and rewards programs. We don't use anything like that much credit, but it's available to us.
Sure but you don't have any obligation to keep the cards and pay fees year after year. When the annual fee is coming up on a card I call up and cancel it. Most cards give you the first year free anyways. Plus the no annual fee cards add up if you've been "collecting" them for a while and there's not usually a reason to cancel no annual fee cards.
Total it would be like $300, but all of them are "first year free".
Plus usually you can call and get the second year free too.
Regardless, I can cancel w.e. and the increase in my credit score is worth it. At the moment if I want to buy a house (for example) I get the best rates on loans
Many cards are first year free but quite a few aren't. AMEX stopped first year free on a lot of their cards. Regardless if I'm getting a bonus I'm subtracting any fees from that bonus to see if it makes sense. If a card is $100 annual fee and the worth of the first year is $500 it's a no brainier to get $400.
I made it into my 30s without ever having a credit card; the only thing in my credit history was a car loan (which paid off in the minimum time). Then various things caused me to be traveling a lot, and I ended up looking at airline and hotel cards, since I might as well earn miles/points for money I was going to be spending anyway.
My credit report (free from my bank) tells me my score is slightly lower than it would ordinarily be because of how short the card history is. I still get a couple "pre-approved" card offers every week and the occasional offer to raise a limit, but I just shred them.
I'm a recent college graduate. It's, frankly, ridiculously easy to build up an excellent credit score. Just open up a credit card (any card, even a secured one) and consistently pay it off every month.
At this point, I have enough credit from credit cards alone to buy a small house.
Graduated this year, Citi literally handed me a $5000 limit with minimal history (I had a credit card I used ~100 times across 4 years of college) and basically told me to go nuts.
I don't think you understand credit scores if you think that's minimal. Having even one card is an enormous boost. And four years of history is not bad either. I graduated college with no credit history and couldn't get a non-secured credit card at all, despite proof of a six figure salary.
That's not minimal credit history, that's quite a bit of credit history.
It doesn't matter how many times you swipe your card, you can get a card and never use it and and still counts for your credit history. The point being you have credit available to you but you aren't using it. You have four years of not running up your credit card, that's huge.
Is it? I was under the assumption that credit history was based on actual payment amounts and the amount paid back, instead of just paying it back. From that I assumed the ~100 or so $4 purchases each I made wouldn't matter much.
EDIT: Huh, apparently I've been ill-informed about credit history [1]. Guess I've been a dumbo and one of today's lucky 10,000.
FICO is based on your credit utilization (amount owed vs credit limit), history of repayment, mix of types of accounts (this has a minimal impact), number of new accounts, number of credit inquiries (aka hard pulls, this is also minimal), and length of credit history.
You had credit available to you for four years and you manage it very, very well.
Other scoring algorithms besides FICO may weigh different things differently but FICO is currently used in most lending decisions so it's what matters for now.
Yep, totally assumed higher loans -> higher repayment -> better ability to repay -> better credit. Definitely not as simplistic as I thought, thank you (and thedufer!) for making me realize this. Yay for accidental good debt management!
Think about it, someone who owes $50,000 and is making minimum payments every month is a lot more likely to default on a loan than someone who borrows a few hundred a month once in a while.
If you want to see your real Experian FICO 8 credit score for free you can do so at freecreditreport.com which is a site now owned by Experian. They break down each part of your credit score and grade you on each. (A-F)
>Citi gave me a credit card with a $3,000 limit as a college freshmen.
How old are you? Just a few years ago, despite making a very decent amount of money and having no marks on my credit, it took an entire year for me to get a credit card. Reason: lack of credit history. A lot of people have similar stories.
>This depends on your definitions a little bit.
The part where you spend money that isn't yours and then pay it off later. That's debt.
Personally, I've learned the game so to speak and now continually get out outrageously good offers for cars, credit cards, home loans, you name it. I have a about $90k~ worth of available credit to me on my CC's alone. But despite having an incorrect black mark for a medical bill that's reported by _ONE_ CRA (the others removed it after I gave them proof that the debt wasn't valid, Experian refuses to listen and because it got reviewed once they won't review it again), I get better offers now than I did when I had a squeaky clean record.
It's an absurdly backwards system. Get debt to get more debt. Hope CRA's don't fuck anything up. Credit card management has no indication how I'll manage a loan (whether a house or car) due to the nature of spending and utilization, but financial institutions treat it as such.
Quite frankly we need "stricter" credit laws across the board.
1. Start out with a "default" score at the very least.
2. Cap interest rates on CC's (20% APR is stupid). No reason a CC should have an interest rate of above 12%.
3. Don't allow medical debts to be displayed in pulls from CRA's. If the institution really wants to see "everything", make them pay a decently high fee for it. They must also explicitly state that in their loan consideration for you, they took into account medical debt. Craft laws around whether or not financial institutions should be able to consider these debts, depending on the loan being offered.
4. Prevent employers from pulling credit history. Your finances are not their business.
5. Prevent landlords from pulling credit history. They are not loaning you money. If they want to pull your credit history, then they need to also contribute to it positively (i.e. report payment history during the length of your lease, accurately).
>Prevent landlords from pulling credit history. Your finances are not their business.
I disagree, if you have a terrible credit history, leasing to you may be very risky. They aren't loaning you money, but they are trusting that you will have the money every month to pay them with.
>They aren't loaning you money, but they are trusting that you will have the money every month to pay them with.
Even more importantly than that: the lessor gives the lessee custody and (limited) care-taking responsibilities over what, in most cases, represents a significant investment of capital.
Far more importantly than that: the landlord, usually morgaged, is making a tenuous claim of ownership of the tenant's home. If the landlord does not keep up with his payments the tenant and his family face the prospect of disruption and upheaval of far greater import than any monentey shortfall the landlord might risk. Therefore the tenant has by far the greater claim to an assurance of the landlord's credit worthiness than vice versa.
i agree. In fact, when i signed the lease, i handed over a check for first and last month's rent plus a security deposit equal to another month's rent.
it's me, the tenant, who is loaning money to my landlord.
Then they should be forced to positively report that you are agreeing to the terms of your lease. It shouldn't be a one way street. Right now, there is nothing for most land lords to really see on credit reports except for seriously cases of rental delinquency (evictions will show up, but these are outstandingly rare). You get dinged for them looking at what will largely be irrelevant information to your landlord. How I manage my credit cards has no correlation to how I've how honored my apartment leases. It makes no sense for someone to deny you a place to live because of other outstanding debts, often these debts do not even follow the same financial contracts or have the same importance in many people's lives.
I've responded to similar sentiments in another comment within this thread, but just to note you misquoted me. I am not sure if that was intentional or not.
> How old are you? Just a few years ago, despite making a very decent amount of money and having no marks on my credit, it took an entire year for me to get a credit card. Reason: lack of credit history. A lot of people have similar stories.
I don't really understand why, but it's way easier to get a credit card with no history if you are in college. People who would easily be approved as a senior in college will get denied 12 months later. It's stupid that it works this way, but some of the best financial advice you can give a college student is "get a credit card before you graduate."
> 4. Prevent employers from pulling credit history. Your finances are not their business.
This resonates intuitively with a lot of people (myself included), and is actually the law in 11 states. There are some interesting subtleties that should be considered before making up your mind though. In brief, the practical impact can make things _worse_ for some demographics often assumed to benefit from this type of legislation. A mass market article: https://www.washingtonpost.com/news/wonk/wp/2016/03/23/the-l...
> 5. Prevent landlords from pulling credit history. They are not loaning you money.
If all goes well, they aren't loaning you money. However, in most states it takes at least a couple of months to lawfully evict a non-paying tenant. So landlords are implicitly offering to loan tenants a few months rent.
I never understood this - why is someone else asking for your credit history a ding on your credit report? It seems really silly to me, but I must be missing something.
Each individual inquiry has a tiny effect. The point is that lots of inquiries indicate you are desperate for credit, and people who try to get a lot of credit at once are much more likely to default on it.
I have a about $90k~ worth of available credit to me on my CC's alone.
How many cards do you have? I understand it's mostly theoretical but I'm wondering why would anyone want to use their high-interest credit card to borrow even a few tens of thousands? Or any high-interest vehicle of debt for that much money, for that matter.
I didn't ask for them. I have 4 total. Two when I got when I was first starting out. I have two cards which comprise the bulk of my credit (one from American Express and the other Chase), which represent ~50% of that $90k. Both have credit limits around $20-25k.
>but I'm wondering why would anyone want to use their high-interest credit card to borrow even a few tens of thousands?
I don't know, but I'm sure as heck not going to utilize them that much! I am sure the credit issuers wish I did though.
Credit cards may not be high interest as you may think. Depends.
Some credit cards have promotional low or no interest rates for a year or so. You can then balance transfer to another promotional rate card at the end of the year. Also many issuers (Barclaycard, AMEX, Capital One) have low or no interest rates for active duty military.
>Credit card management has no indication how I'll manage a loan (whether a house or car) due to the nature of spending and utilization
I think the actuary-types who design the scoring models would disagree vehemently with this one. Scoring models are built from regressions on actual default rates.
Considering renting history is not accurately reported in any meaningful form, I don't know how they disagree with me. Most people probably aren't willing to give up their car, I'd figure those that have credit issues are still most likely making car payments.
It's one thing to say "I see you've been late on a few of your car payments, so we're going to give a higher interest rate." and it's something else to say "You have a few unpaid medical bills/late CC payments so we're going to give you a higher interest rate on this car loan."
I just have a hard time really believing that is the case. Often credit issuers simply look at the totality of everything, instead of appropriately looking the history of the specific financial contract they're wanting to issue.
Accurately predicting your likelihood of default is worth a ton of money. If every company makes bad assumptions like you describe, then a new company could make a ton of money by correcting those bad assumptions and giving out loans to people who can't get them otherwise.
That doesn't mean that systematic failures can't happen, but they're pretty unlikely. It's much more likely that you underestimate the correlation between these disparate defaults than that the banks overestimate it.
That's pretty much my whole point. New companies regularly step in and take advantage of competitors' biases, so anything that looks like a long-term systematic bias probably is actually a reflection of a real correlation instead, because if it was a real bias, somebody probably would have stepped in and taken advantage by now.
"I felt pretty "trusted by definition." Citi gave me a credit card with a $3,000 limit as a college freshmen. A few years later I had an $8,000 limit card and a $10,000 limit card."
As a recent immigrant I felt pretty untrusted. In my late 20s, despite being able to show a year of income in the six digits, no overdrafts, I had to go to four separate banks before finding one that was willing to give me a $300 limit card.
As a Canadian expat, my experience was nearly identical to FireBeyond's upon moving to the US. As you suggest, I was able to get a store credit card, then it was over a year (during which I never used the store card at all) before I was even considered for a regular credit card. If that's not symptomatic of a broken process, I'm not sure what is...
I honestly don't think it's broken. If I'm going to loan you money it makes sense that I'd like you to have a history of successfully managing debt and access to debt. You are more risky if you don't have a history.
It makes logical sense. Is it fair? I don't really think so, but its at least logical.
Find a secured credit card. I was able to get one from USAA with a $5,000 limit (you just deposit $5,000 in a CD to cover it). Not many people realize this, but you do not have to be in the military to bank with USAA (you do if you want their insurance products, but not for banking).
Also in my late 20s, in the US temporarily and nowhere near six digits (academia, sigh) and I've found it okay. You just have to be selective where you apply. I got an unsecured $1000 from Discover (since been increased) and an unsecured $300 from Capital One. I applied for those cards because they both have a reputation for being more friendly to people with empty credit files, and my credit score is now around 715 (TransUnion).
I mean, it's not great, but you have to start somewhere, and I've only been here 9 months. Was very frustrating to have to start from scratch when I have good credit in my home country, but completely understandable.
The really frustrating thing is how your credit score influences everything - apartment hunting, mobile phone contracts, etc. That's the only reason I'm trying to build my credit at all here. It feels like having a bad credit score puts you at a distinct disadvantage in the US, which is something I've never felt before.
It's not the only country in the world to do it. South Africa does it as well. You don't get credit by default, and instead you have to earn it by doing incremental "small" debt-like things. E.g. post-paid telephone accounts, buying small items of furniture on a payment system, etc.
Until you do those things, you are most likely going to get denied high-ticket loans such as mortgages and car-financing.
I don't think you really are trusted by definition in EU at least when it comes to mortgage, because you need to prove you have stable income, even though they won't lend you the full price of the property you put the mortgage on.
NZ and Australia both have positive credit score systems (both introduced in the past 10 years).
I wouldn't necessarily agree with a gut reaction that positive credit scores are absurdly backwards. It makes sense that I would trust someone more as a borrower if I know they have repaid debts in the past (versus having no history at all). The system could probably use improvements and more regulation, but I don't think it's fundamentally off base.
My only concern with the system is that it treats people with no need or desire to have a credit card as 'risky', even if they have excellent assets and income. I'm personally unable to sign up for a mobile phone plan because I don't have a credit score, yet I rent a home, own a decent car and earn decent money without the need to borrow... This was only an issue because the person rejecting my application was relying on a computer screen to say 'denied' and where there is no room to say 'thats a bit silly'.
I don't know... As a foreign student I was for some reason given some positive credit score. That was surprising enough, but not as surprising as having my credit limit raised very liberally every time I reached it. I can tell you that doesn't happen in Spain at least (and seems in reality more sensible).
"that is that the US is a country of immigration and so you had to find a way to allow foreign people without any history and no reason to trust them."
Remember our banking system in U.S. pays politicians to create laws that benefit them. It's actually not much a stretch to even claim they own the country between ex-bankers doing the regulations, bankers paying off politicians, bankers getting bailouts, the Fed, and bankers obviously controlling financial backbone of economy. So, I always consider whether this could have impacted a law, standard practice, or whatever.
Well, one thing they like is you buying stuff with their money and paying interest. It's basically how they all make money outside things like fees and services. Guess what our "backwards" credit system forces us to do. You were absolutely correct if you guessed "guarantee billions in profits for bankers." I'm not sure if they created the original model but it should be on list of possibilities to consider given they pull lots of stuff like this.
Another example they probably paid politicians for is how they do tax write-offs on charged-off loans they're not going to collect. The reasonable parts are them not paying taxes on loans they can't collect and borrower paying taxes on amount they borrowed because it's effectively income. The sneaky modification they also write off the interest and fees they charged on top while borrower pays taxes on those as if they were income. Interest and fees certainly aren't income. This scheme works great for banks and IRS but not consumers.
I don't see what's so strange about this. Let's say you were lending money. Would you prefer to lend it to a person with an established history of taking out and then paying back loans, or a person with zero history either way?
I don't think it's accurate to describe the system as starting out not trusted. There are many levels, and misbehavior can easily give you worse credit than the default. You start out neutral and then go up or down depending on what you do. Which seems like exactly how it should be.
Perhaps it's my English that's just not allowing me to communicate clearly but I think people are missing the point here.
There are plenty of other ways to credit companies could gauge inside your economic maturity as much of your financial history have been done via debit card for more or less the same transactions that you are going to use your credit card for.
In other words the information is there already because you have been using your debit card already.
And yes it is accurate to describe it as not trusted which is why you need to increase your credit score by using your credit and paying it back.
I don't see how debit card use would get the job done. Those transactions take money directly and immediately from your account. The whole idea of a credit score is to judge your ability to pay money that you owe later on when it's not automatic.
You know credit score isn't the only thing used in a credit decision, right? On a credit application you are asked about assets, income, amount of rent you pay, and account balances.
Credit score is one of many pieces of information used in lending.
Alternative credit scores are starting to come on the market for people who pay bills on time but may not otherwise have a traditional credit history but they are pretty experimental still. There's different algorithms too. The current one used most often is FICO 8 but there's a LOT more.
Each lender has their target borrower too. Some lenders are what is called subprime lenders meaning they lend to people with low or limited credit histories.
Debit card usage is not going to be fundamentally different than your debit card usage. So yes it makes plenty sense as it could show something about your general ability to stay financially healthy.
You are asked about assets, income etc. but those things have very little effect on whether you get a credit card or not.
This makes absolutely no sense. You are using your own money when you swipe your debit card. You are using someone else's money when you swipe your credit card and you pinky swear you'll pay it back later.
You can't go into debt using a debit card because you are spending your own money you already have.
You can gauge into peoples financial responsibility simply by looking at how much they manage to save, how often they hit zero or almost zero on their account etc.
These are much better indicators of your ability to handle money than spending money and paying it back to build credit history.
Again it works in other countries and so of course it can too in the US.
There are two basic scenarios that credit card companies want to avoid with their customers. There's the scenario where the customer buys a bunch of stuff they can't afford and then can't pay their bill, and there's the scenario where the customer can pay their bill but just doesn't feel like it.
Both scenarios are fundamentally impossible with a debit card, so I really don't see how there's any relevance here. It's not the purchasing end that they're interested in, it's the paying-it-back part.
You are way too tied up on the credit vs. debit part.
Thats not really important here.
You are not suddenly going to become financially irresponsible just because you get credit and yes you can determine someones financial responsibility by looking at their debit card usage that is why you can actually convince someone if you get rejected to look at your case again to show them additional information. This is why you can get a credit card in citibank if you have 25K in your savings account for 3 months straight and so on.
And you're not nearly tied up enough on the credit vs debit part. The whole point of a credit report is to determine your suitability for credit, which is something that simply doesn't apply to a debit card.
A ton of people suddenly become financially irresponsible just because they get a credit card. It's a massive problem, and that's why companies want to see some history. Being responsible with a debit card where there are hard limits on how irresponsible you can be doesn't mean a whole lot for how you'll be with a credit card.
Yes I am aware of what the point is. What I am telling you is that it's not necessary which is witnessed by other countries who have no problem not using credit history to give people credit.
The problem with people using the credit card lies as much in the incentive structure of getting points, building credit etc.
And it's obviously speaking against your claim that so many american have issues with their credit cards given that the very test your claim is necessary is failing on so many.
No only have I been in the US fairly long now I have also lived other places and only the US is asking me to create debt to get a credit card and be able to rent an apartment. Other places they actually do look at your non credit card history to assess if they are going to give you credit.
> In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off.
You have to do the same to get a mortgage in UK. And that's why I need a credit card
> In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off.
This seems backwards to me. The proof that I am good with money is that I have never been in debt. When I got my home loan the additional proof was having a deposit.
In Germany, it was long years the custom, that when somebody asked the agency about his score, they in turn dropped his score.
This is not legal anymore, as much I know, but still also in Germany, your fate is sometimes bound to the street, in which you live, instead of your own behavior.
PSA: If, like me, you sign up on www.transunion.com to view your account, be aware that the sign-up process uses dark patterns to stealthily sign you up for a $19.95 / month subscription.
The 'Cancel Membership' page is hard to find, but here it is:
My father and I have the same first name and middle initial (but different middle names).
As a result, I've spent at least 1 entire calendar month in the past decade to "disentangle" our credit reports. With Equifax it wasn't finally resolved until I showed up unannounced at a regional office in a suit.
Yet again, we're entangled with TransUnion (after last resolving it 18 months ago), with me having to enter security questions as if I were my father in order to confirm my identity.
The most maddening part is it is extremely difficult to talk to someone in the US if you have a problem with any of the large three bureaus.
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312 comments
[ 5.2 ms ] story [ 274 ms ] threadThis is a dishonest statement. Having your insurance be slightly higher isn't nearly as serious as having your plane fall out of the sky. And if only 5% of software had bugs, we'd call it one of mankind's greatest triumphs.
The only thing in this article that concerns me is this statement:
"Those two states denied his application after he failed a credit check[...]"
The government shouldn't be allowed to depend on private companies to approve or reject you in this manner, because then a company like Experian is - in a small way - deciding the law. And Experian in particular is a foreign corporation(headquartered in Ireland), so it's doubly-problematic.
In order to get a service I'm required to have by the government, I had to have my name in a system run by private, for profit companies.
I hate it too but I got a student credit card in college and never let it go late. That has paid off many times over the years.
For me is always weird when you see things like "no flight lists" and it is just a list of names. In Spain or Sweden your ID will be listed and the rest of people named like you spared of being harassed.
Another concept that I don't understand is that USA's social security number has to be kept secret or otherwise your identity can be stolen. How that is even possible? Doesn't your employer needs it?
An ID card is not perfect. 40 years ago Spain issued some duplicated numbers, before computers were so prevalent, causing problems. But it solves a lot of problems.
It always seems that private and public bureaucracy in the States is worst that it needs to be.
In a system like the US, I think it's better for the states to handle identification cards, not the federal government. There's a lot of details that go into identifying someone, and your local state is best equipped to handle that.
To give a few examples:
What's the procedure for changing your name? A lot of people change their name after marriage or divorce. Those are usually handled by the states, so adding a federal government in there raises the net complexity.
Should people in Alabama be able to force the residents of California to put their original sex on a federal id card? I don't care, but other people do. It could be one of those pointless political distractions that's better left unanswered.
If the federal government runs it, now they have to own or rent a bunch of land in every major city in every state so they can service id card requests. So it gives them a larger presence. I guess they could reuse social security offices, but they couldn't reuse state DMV offices which are the more natural choice.
Don't we already have that with the post offices and the passport system?
Couldn't they expand passports into a Federal ID system?
I'm not qualified to comment on constitutional issues so I won't.
I will say that, even if it's mostly an emotional issue (people already need at least some sort of state government-issued ID to do lots of things), there's a huge resistance in the US to anything that smells like "papers, please" or universal ID that people are required to carry and present upon request.
Which is how a lot of people view the idea of a Federal ID system. That may seem silly to a lot of people outside the US but it's how things are.
And yet, you are, under certain circumstances, already required to ID yourself to a police officer upon request.[0] The most common form of ID? Your driver's license.
[0]: https://en.wikipedia.org/wiki/Stop_and_identify_statutes
The Tenth Amendment's Reserved Powers clause also suggests this is a states issue, unless you can contrive it to be part of the census.
To be clear, the federal government is already involved with name changes-- in fact, though my name change was issued by a state court, I had to get it changed with Social Security before I could get a new driver's license.
Similarly, passports do have a sex listed, so that's already something with federal jurisdiction. The passport system is also handled through post offices, solving the problem of needing more offices.
Fifty cryptographic APIs, on the other hand, would be a nightmare. We'd at least need the federal government to force states to implement one conforming to some open standard so that the integrations aren't intractable.
Each state has it's own Drivers License and usually a very similar card that is simply for ID. Many places such as banks or cell phone companies will request your drivers license or ID # in addition to your Social Security # to open an account.
Yes, as well as utilities, banks, insurers, hospitals, etc, etc. Treating the SSN as a password is idiotic, to the point where I almost wish Anonymous or someone would publish every American's number so that we'd be forced to stop doing it.
http://www.sciencemag.org/news/2009/07/social-security-numbe...
The actual situation is quite a bit less dire than your quote.
What that linked article says is that for people born AFTER 1989, the first five digits could be guessed with 44% accuracy. (There's a very real sense that the "last 4 of your social" are less guessable than the first five, so it's no surprise that the last 4 is what is often used/misused.)
If you have those last 4 digits, and you can guess the first 5 digits with nearly 50% accuracy, then you have a very good chance on getting legitimate SSN's for mass numbers of people with a DB dump.
Here, places verify you over the phone by the last 4 digits of your social security number, so you have to keep it secret.
If I'm evil and know your ID what can I get away with without a card? And what can I do with a decent fake card?
For online usage you need digital identity cards and they have two factor or are hardware tokens.
You can impersonate somebody with a decent fake card, but just having one is enough to go to jail.
I have not had a physical social security card in many decades. I think it was in a wallet that got stolen in the 1970s and I've never gotten a new one and never needed one (or even been asked for one that I can remember).
Social security number is sort of that. But various businesses keep accepting it blindly from fraudsters ("identity thieves"). So for now it remains semi-private because it is overused for authentication.
> Another concept that I don't understand is that USA's social security number has to be kept secret or otherwise your identity can be stolen. How that is even possible? Doesn't your employer needs it?
The trouble is really that it is accepted as a an authentication credential in many places, even though it is just a not-very-random unique number.
It doesn't make sense, but basically knowing name, date of birth, and social security number is enough to open a credit account (sometimes you have to answer some questions which would be on a credit report, or provide an ID card if you're doing it in person). This is why it's important to try to keep it secret; on the other hand, employers are required to have it for taxation purposes, as well as any creditors (including utilities) want it too; most health insurance is driven by SSN too, and so are many health records; so the number is all over the place.
Court records (the issue in this article) wouldn't normally include a social security number, so the credit agency is 'helpfully' associating those by name, maybe date of birth, and city of residence with other records in their files.
None. The credit reporting agency should be verifying any facts they intent to include in a report. If the are including unverified hearsay, the their report may be libel[1].
Also, your own ID card wouldn't fix someone else with either no ID or fraudulent ID doing something in your name. If the bank gave a loan to someone else, that's their problem, not yours.
[1] I'm aware that regulatory capture has granted the agencies immunity from slander/libel laws. Just because unethical behavior has been legalized doesn't make it the victim's responsibility to work around libelous claims.
If you live in the US you should consider filing every block available to you so for the banks you don't use, you can start the discussions with asking why they were illegally pulling your credit record or giving credit without it.
In Europe, it looks like banks are petitioning to be allowed to verify identity over camera phones using an independent third party. That is still better than the US, since you can probably force them to retrieve that record of "you and your id" fairly early in a dispute.
The other problem is that without a reliable primary key, it's much easier for correct information about different people to be incorrectly mixed. While this is not as bad as, say, when it hits a sex offender database or terrorist watch list but it does happen and would go down dramatically if everyone could just use something like a SSN as the link instead of trying various fuzzy heuristics and hoping for the best.
The TSA tried to impose one, but a lot of States are pushing back against it. (Washington State called the TSA's bluff and obtained a 2-year "extension" of our horrible awful non-TSA-approved satancards.) Even if the Feds succeed at requiring all State cards to feed into the same database, they have no power to require that every citizen obtain one.
The SSN was never intended to be ID, it's an account number. Anybody using it for ID is doing it wrong, but unfortunately, that's a heck of a lot of people.
Wasn't that basically BS from the beginning though? What other purpose would it serve?
Just like your bank has a number that describes your bank account. It doesn't describe you, but an account you own/control.
See how British cops deal with a mentally unstable person v/s how American cops gladly shoot down an erratic teenager. That is the difference.
If USA has a real ID card and government decides to screw you up the only choice you have is to either sneak into Mexico or just kill yourself. You wont be able to find a job, drive, fly, purchase anything, have a bank account etc.
I do still try it each time though as it's still quicker to fail and then get a wistful comment from the guy checking my passport about the issue with the system.
GE doesn't match by name and birthdate, it uses your known-traveler number.
I think adopting this framing is what makes it really bad. Your identity cannot be stolen. The whole concept of "identity theft" is bullshit intented to shift blame. It only so happens that some entities are incompetent at verifying people's identity. That shouldn't even be your problem, as you have no influence whatsoever on how others check the identity of people, so you should not in any way be responsible for dealing with the consequences if someone thinks that you owe them something just because they believed someone else's claim that they were you.
Some entities are incompetent at verifying identity because some people are very loud about making sure a a modern ID verification system doesn't get built, because the ability to commit fraud is a civil right or something.
We need .gov smartcards. Or at least a .gov OAuth provider. Instead we are in the dark ages of shared-secret numbers (SSN, credit card, etc) and scans/faxes of easily photoshopped printed cards.
There is an argument this should be a private responsibility. For interactions on an existing account, this makes some sense - banks should be shipping hardware tokens, for example.
The big issue with identity theft is criminals opening new accounts under other people's identities, and this is a serious problem because the government will enforce that debt against people who didn't actually incur it. IMO it is government's responsibility to demand better proof of authenticity before signing up to enforce it.
That's not really a good solution either, though, because that requires trust in an essentially unverifiable system and the entity producing it.
> banks should be shipping hardware tokens, for example.
No, they absolutely should not. That's like saying banks should send out staff to take care of signing stuff for their customers, and then insisting that the government should enforce whatever their staff signed against the customer. That's a completely broken security model.
As for authenticating orders to your bank: You should be able to use any compatible product/software you like to sign orders to your bank with your private key. The bank should not have the ability to fake orders to themselves (see also the Wells-Fargo fiasco).
If a .gov smartcards are a pipe dream, this is a pipedream^10. Private companies will throw a fit if they can't lock people in.
The most important thing about a government-level identity system is extreme difficulty of obtaining any identity other than the one you were born with. It seems inevitable in a web of trust that fraud rings would emerge to manufacture identities for those looking to escape debts, criminal convictions, etc by some combination of tricking and bribing people to sign authentications.
>You should be able to use any compatible product/software you like to sign orders to your bank with your private key
I'm not sure you should be able to use, say, a poorly written IE extension on your unpatched Windows XP machine. Something federated would be great, where any manufacturer can technically make something compatible, but it has to meet a FIPS standard or something.
Keys could be generated onboard, and then you upload your public key or something.
We're getting way ahead of ourselves - banks are extremely hesitant to use anything better than secret numbers. I'd rather a shitty 2FA implementation than that.
Which could possibly be counteracted by attaching a certain amount of liability to a signature? Also, you potentially can detect fraud rings. But, as I said: I am not really proposing anything.
> I'm not sure you should be able to use, say, a poorly written IE extension on your unpatched Windows XP machine.
Yes, you should, absolutely. Not only is it impossible to enforce anything else, but that's just your own responsibility, just as locking your own home or car or whatever is your own responsibility.
> Something federated would be great, where any manufacturer can technically make something compatible, but it has to meet a FIPS standard or something.
Federated? You mean an open standard? Yes, that would be the idea. But none of the FIPS crap, that never works. Certification only prevents improvements, security fixes and the like, and usually only guarantees a minimum level of security that's worse than what would happen without it.
> Keys could be generated onboard, and then you upload your public key or something.
No, keys are generated however the customer wants to generate them. The customer supplies a public key to the bank, and it's the customer's responsibility to keep the private key secure. If they think a smartcard from a specific vendor is the solution they trust, that's fine, more power to them. If someone else trusts more their own software on an airgapped raspberry pi, they should be able to do that.
> We're getting way ahead of ourselves - banks are extremely hesitant to use anything better than secret numbers. I'd rather a shitty 2FA implementation than that.
I don't. The more technically complicated the authentication system is, the harder it is to make people, and especially courts, understand what the failure modes are, and thus, who should be liable when something goes wrong. Lists of random numbers are relatively easy to understand (especially the fact that a bank obviously knows the "secret" numbers and thus cannot really prove that they got it from you).
Is there a reason you can't articulate your views on a system that is live and working successfully?
First of all, I wrote above you in this thread, regarding smart cards for government ID:
> That's not really a good solution either, though, because that requires trust in an essentially unverifiable system and the entity producing it.
So, maybe you want to address that instead of just pointing out that people are in fact using a system that obviously has this problem that I already mentioned.
As for why electronic voting or electronic counting of votes is a terrible idea (I would have thought everyone on here knows that by now): It's impossible to audit. Elections are the failsafe of a democracy that has to be able to remove a government from power that tries to prevent being removed, and they are about the control of huge amounts of recources. Therefore, you cannot have trust in a small minority as the basis for its reliability, you have to have a system that is very hard to corrupt even by the government. A government server counting votes is the exact opposite of that.
See also: https://www.youtube.com/watch?v=w3_0x6oaDmI
The fact that, so far, noone has seen any problems is completely missing the point. First of all, the whole system is set up such that it's really difficult to find out if something went wrong/was manipulated (that's just the nature of electronic voting). Secondly, most elections aren't all that problematic. In times of peace and prosperity, there usually isn't much contention over the results of an election. What makes a voting system good is when it's able to stay reliable and trusted in times of political unrest.
Further, I concede that you are correct as far as voting goes. That doesn't mean the card is useless. It serves other purposes quite well, even if imperfectly.
Voting obviously is the biggest problem, but other uses have similar problems. Especially in terms of how you could ever figure out if it's actually not working well. You say that it serves other purposes quite well--how do you actually know that? Is it just because noone has demonstrated yet that, I dunno, the smartcards have a backdoor that is actively being used to sign stuff in other people's names? How would you know if that were the case? How would you convince a judge that you didn't sign some document when they ask you to explain how it comes that their computer tells them that you signed it?
How would you convince a judge that someone was holding a gun to your head as you signed a document?
How would you convince a judge that you didn't sign something when they ask you to explain how it comes that the signature on the document matches yours exactly?
With a smartcard, there is nothing of that sort. It's just a bunch of electronic numbers and "the blackbox says you signed it!", there isn't really anything there to investigate, plus judges can in general be expected to not have even the slightest clue how to evaluate claims about IT security, so more than likely you'll end up with a situation where judges simply accept the government-mandated assumption that what the blackbox says is to be trusted.
It's the same fundamental problem as with electronic elections: The actual process is necessarily completely removed from human perception/observation, and therefore ultimately must be trusted blindly if it's not to be rejected outright.
Although it can be a pain, the responsibility of if your credit report is accurate falls on you, the consumer. You should many of the free services to check your credit and then dispute any events that aren't correct. Most people don't have issues but you can have companies that don't report payoffs (they should be fined or something), companies that assign accounts to the wrong person/SSN, etc.
I can only be responsible for the things I do. If some shithead wants to give third-party information about me it better be accurate, and if its inaccuracy causes me harm it should be actionable.
> when all other factors speak against it
Given that the agency thinks they're the same person, the number of convictions is irrelevant. A credit agency has no knowledge of skin color. I'm not sure that a credit agency would know if someone was incarcerated -- their accounts could still be active and paid for by someone else. Credit agencies keep track of residence addresses, but would likely assume that he was at his last know address.
I think the root of the problem is getting a criminal background check and a credit report from the same place. The quality of information is quite a bit different, but the expectation is different.
For a criminal background check, I would expect false matches because the lookup is realistically based n name and date of birth only. As a result, I'd want to know additional information, such as mug shots, and current status (incarcerated, on parole, etc) to confirm if the person with the record was the person in front of me.
I would assume they can get this information, considering that some reporter seemed to be able to get this information easily.
Making hard decisions on wether two people are the same is hard. But that's exactly why "name and year of birth match" seems like a naive algorithm. I would expect a match probability based on the treasure trove of statistical data that these agencies possess. A person that is currently incarcerated is less likely to be the same person that is currently spending and earning money, and for which landlords request reports. Skin color is strongly correlated to place of residence: if you know (automatically or manually detected from a mugshot) that one person is black, you can get the statistical probablility that the other person is black from the neighbourhood he lives in. etc.
>I think the root of the problem is getting a criminal background check and a credit report from the same place.
I agree that this is also not optimal. In Europe this type of information is obtained by requiring a criminal record certificate, a certificate anyone can get from a police station to show their (lack of) criminal record.
I mean, I don't actually owe it to a bank to ensure that some other party has accurate information about me.
I've had this exact same thing happen to me, about 6 years ago, when applying for an apartment lease. The landlord called me to ask about the violent offenses (robbery, assault) that came back on my background check that she was _sure_ couldn't be me. How am I supposed to monitor that? And, how would I do that _at no cost to me_?
It is disturbing how the entire economic system is set up to make life harder on those it's hardest on. Poor, in debt, barely making ends meet? You're lucky if you can get a credit card for under 30% APR. Mortgage rates historically low? Not for you. Need a loan? Sucks to be you.
Finally clawed your way out of debt, trying to get ahead? Tough shit, your credit report will haunt you for the better part of a decade.
What about that doesn't make sense? The person you described carries an incredibly high default risk.
If credit scores are unfair to the poor, it's because they don't provide accessible way to fix errors. If your credit score is low because you're in excessive debt and unlikely to pay it off, then the credit scoring system is doing its job.
The point is, we help those that don't need help, and hurt those that are already hurting. We give better rates to people with high credit scores, but people with low ones probably need it more. It can turn into a feedback loop where the only way out is some form of outside help.
Beyond that, credit cards can adjust the APR on existing balances.
When we ignored the basic laws of economics we had a mortgage crisis and thousands of people lost their savings and jobs.
There is plenty of outrage over that and all sorts of other things, just not enough to change the way things are. Too many interests, too-many individuals with their entire lives and mindsets invested in the way things work at the moment. As someone that advocates less state-involvement at all levels, I find it incredibly frustrating to watch day to day things unfolding. Every single facet of our lives is affected and skewed by the state in one way or another. Sometimes in a good, and sometimes in a bad way.
No they don't. Loans are insured against default. Interest rates more than cover extremely low default rates and then some.
https://en.wikipedia.org/wiki/Collateral_protection_insuranc...
http://www.investopedia.com/articles/investing/022416/why-ba...
https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...
Clearly you spend more time attempting to belittle than understand the conversation.
Credit reporting system works pretty well and it is evident by the fact that we have seen mortgage bubble burst (where government forced banks to ignore credit ratings) and student loan bubble building up (ditto as housing loans).
The marginal gain in making it more accurate is not very much so I am pretty sure banks will not put efforts in that direction. Also, banks don't care if 1 in 10000 get screwed up because of their mistake because there is plenty of more fish in the pond. But that is how the world works.
The credit rating idea was born out of the Southern morality culture. "Are they good people? Let's put a number on it and sell it!"
The flip side of that is that they can't possibly be wrong unless you prove it, and even then, they're so butt hurt that you called them out on it that they'll take their time fixing it, if ever. The idea is that they're right, you're wrong, and they have powerful friends who protect them from being sued for slander.
Citation needed.
> (where government forced banks to ignore credit ratings)
This is simply not true. The mortgage bubble burst when big investment and gambling/speculation institutions could no longer cover the shorts against mortgage bond derivatives and the incentive for packaging questionable mortgages into the underlyings disappeared. These mortgages weren't all (or even mostly) to poor people with no ability to pay, and the government didn't force anybody to do anything.
These same banks paid ratings agencies to ignore the bad mortgages in these securities specifically so they could increase the volume of mortgage bond sales. So your example is actually one that shows that ratings agencies' products are not necessarily accurate (some might call them fraudulent, even).
> where government forced banks to ignore credit ratings
I was under the impression that subprime was keenly aware of credit ratings, subprime is defined as failure to meet the Fannie May and Freddie Mac standards. The CRA excluded race and gender as loan criteria, leaving credit rating as the goto.
There's lots about banks like countrywide ignoring credit rating, but i can't find anything where the government required ignoring the credit rating. Could you help me out with a link?
As one example that has affected me, I moved to the US a year ago. Go to buy a used car last month with bank statements showing a good salary and enough cash to buy the vehicle outright, a check for 1/3 of the car price, and phone numbers of my employer and landlord. All the banks the finance department contacted automatically denied me without looking at the stuff I brought.
I went to my local bank branch thinking a human might help. I got automatically denied, the manager tried to escalate given the information I provided, but I was still denied.
In the end my loan was through the car manufacturer at a fairly high rate.
I realize I am fortunate in that I can afford to take a crappy loan solely to build a credit history and play this silly game. But the way the model is used treats people who are new to obtaining US credit and people who have used credit terribly virtually identically.
Anyway, I had a similar issue with car loans when moving to the US. I've since realized that it's pretty trivial to increase your credit score if you pay a small amount of attention to it. Simply sign up for credit karma, get a few no annul fee credit cards, and put a small purchase on them every few months so that they don't get closed due to inactivity. Within 12 months your credit score will be stellar.
But then, after 3-4 years, it's pretty damn convenient not needing to mess around with lengthy applications for credit (except for possibly on a mortgage), and having a credit reputation that's completely portable across providers.
It pretty much makes sense that newly arrived residents are a corner case that isn't worth worrying about too much for the banks and credit reporting agencies - at any given time, the number of residents who have been here for less than, say, 2 years is going to be a pretty small, somewhat risky part of the market (less assets in the country, more likely to leave).
The banks do pay for it - they have to pay a fee do get your credit report.
They have a clear incentive to not underestimate prospective borrowers' credit risk (or they'll lose more in defaults than they gain in interest), but the only incentive to not overestimate someone's credit risk is that someone else might offer a loan on better terms. Even if they are aware of flaws in their assessment process that overestimate a borrower's risk, they probably feel safe in the knowledge that everyone else is using that same process and will overestimate risk in the same way. A more accurate credit assessor could profit from this situation ("get your credit reports from us, and you can undercut lenders who rely on the big three"), but the barrier to entry is rather high.
1. Signup for https://www.creditkarma.com. Yes, you can argue about giving your credentials to a 3rd party company and they show you ads but credit karma sends me real time activity on my credit report FOR FREE. I get offers etc but I am happy since I can keep an eye on my credit report from all agencies. (except Experian who want you to pay them for report).
2. Get a free credit report once a year from https://https://www.annualcreditreport.com
3. Get your FICO score from discover [0] for free OR Open a credit card with Citi cards [1] and I think for $95/Year fee, they give you free FICO score which is the score that majority of lenders use. There are many other companies that offer FICO score for a fee but this was a good way for me since I needed that type of card anyway.
[0] https://www.discover.com/free-credit-score/
[1] https://www.cardbenefits.citi.com/Products/FICO-Score
4. Check your credit card and bank statements every few days. I do it once a week. It is a good habit. For this step, do it manually. Don't rely on mint or tools like that. Check the transactions manually.
5. Setup alerts with your bank/credit card for transactions with a certain threshold. For example, I have alerts for anything over $10. For under $10, see Step 4. This is another step in case you do have a fraud.
5. Don't give out your SSN or credit information to anyone unless absolutely sure. Never give these on a phone call with any company unless you know that you called that company and they need the info (example: health insurance etc).
6. If you ever get a call from a Collection Agency, do not give them your information right away. Lot of collection calls are plain fraud or incorrect. Ask them to send a letter with details (genuine ones will do anyway). Read this from FTC about debt collection to educate yourself
https://www.consumer.ftc.gov/articles/0149-debt-collection
These steps will keep you safe for the most part.
Fun fact about credit reports: See this video by John Oliver.
https://www.youtube.com/watch?v=aRrDsbUdY_k
I've had a lot of numbers in the past because my daughter's phone was in my name, or I changed carriers and my number wouldn't transfer.
TransUnion and Equifax give you PDFs of your report that you can easily download. Experian just shows you an HTML document. There's a "printer friendly" version, but the only thing that's really different is they removed the navigation and the "Dispute" buttons that are listed next to every item.
On top of that, there's a position:fixed header on the print friendly document, which most browsers will render once on every page. In this case, that causes information at the top of each page of the report to be covered up. I was able to use Chrome's DOM inspector to set it to position:static and then Print > Save as PDF, but it really shouldn't be that hard.
As well as Discover, Barclays and USAA credit cards both offer (one of) your credit scores without paying an annual fee.
However the bigger issue is checking the whole credit report not just the score.
These are things you should not have to worry about in life.
They are expected and in most modern countries are not something you need to worry about.
When I tell my friends about this in the US at first they don't believe me. The can't believe that the banks make so many mistakes (such as credit/debit the wrong person for a check) and that there is this thing called a credit score which you have very little control over and can ruin you without you doing anything wrong.
The amount of time I have wasted in fixing credit scores and dealing with overdraft fees because someone else's check was pulled on the wrong account is staggering.
I have a Citi Doublecash with no annual fee and they provide a credit score. Been with them for many years though so your eligibility may vary.
Incidentally when I was an identity theft victim they didn't remove the incorrect information, they just said the fraudulent credit cards were "never late" and thus would not affect my score. I thought that was lame.
https://oag.ca.gov/idtheft/facts/freeze-your-credit
There's a similar problem with Google. I have the same name (and it's not that common) and same age as a disbarred attorney in Arizona.
I always wonder how many times a new contact, or potential business partner, googles my name, finds the disbarred lawyer who was prosecuted for tax evasion, and decides not to do business with me. This wouldn't be a case of mis-information, but just of sloppy research.
It is not perfect, but it is not that bad. It sucks having to have your money blocked in an account for a year though.
I'm beginning to think one of the biggest causes of all this crap in the US is the "American rule" regarding legal costs. Even if you win, you still lose unless it was a massive case. Stupid.
I can't think of many more unconscionable models for a secondary revenue stream than targeting people who are insecure about their finances and bad at reading small print and trying to get them to pay nearly 100x the price they need to pay for information for some extras they're unlikely to use.
[1]in the UK they're actually allowed to charge a small one-off handling fee of up to £2 if you request your credit store. But "free" plus a large recurring charge for bundled extra data if you don't cancel within 30 days was more profitable...
BUT they sign you up for a $22 / mo service. It is not very obvious that they did this, and it's somewhat difficult to deactivate your account. (I imagine people here wouldn't have a problem, but I'm imagining the average person here).
That to me is a dark patten.
At least in Europe it's mostly based on a negative creditscore i.e. you are trusted by definition but if you don't pay your bills you end up not being allowed access to credit.
In the US they don't trust you per definition and instead you have to prove that you are good with money by basically creating debt and then paying it off.
This is obviously to say the least absurdly backwards, but I believe there is a rational explanation and that is that the US is a country of immigration and so you had to find a way to allow foreign people without any history and no reason to trust them.
You could instead just look at the history of their debit card usage to figure out whether they are trustworthy.
As I said though I understand why they do it, it's just not a very useful model IMHO but because it's big money and it's complex to change it most probably wont for now.
I don't think it's backwards. Debt is only a bad thing if you're being irresponsible about it, so it's like a weedout test. In the other system, can you just buy a house on credit with no credit history? If so, I just find that hard to comprehend.
Also, re: your comment about foreign people, my dad had no issue with it, but maybe you're saying people that are not yet citizens?
A lot of people don't realize this I think but if you hold a balance, especially over whatever percent of your total credit, it hurts. The moment I paid off all my cards my credit score jumped and all my limits increased.
You could learn about peoples financial maturity through simply checking their normal debitcard/bank transactions.
Does he/she pay is monthly rent, is he/she constantly hitting zero on their balance etc. None of this require credit card usage.
Citation required because debt is not the same thing as money, so associating them together like you do with your assertion requires something more than just your illogical statement.
I live in the US and I grew up in Denmark.
Both systems allowed me to have credit cards, rent apartments, buy a car etc, but only the US system forced me to do that by creating debt to show that I could be trusted with debt.
In other words large parts of the world do in fact associate them and aren't like us in the US debt ridden.
For instance paying your rent on time. I.e. something that can be proven other ways than using your credit card.
Being non-american I went trough this and have a pretty good idea on how it works and some of the myths.
I guess some of the confusion is around the before/after a card.
If we want to avoid debt "accidents", only letting people with demonstrated experience seems like a good solution.
A provisional license offers both supervised training and effectively delays entry into the unsupervised insurance pool by a year.
After this, location (e.g., ZIP Code, in the US) and miles driven are the biggest predictors. Latter are why insurance companies will do almost anything to get ahold of odometer readings.
Source: Worked on auto insurance risk products.
I had to basically fund my own credit for some time and pay it off. All which cost money of course.
As a foreigner thats how it's normally done. At least in a bank like Citibank.
And you would never have been in debt.
2) Shred credit card
3) Now you have a credit history
(They'll probably close your account in a year of inactivity if you don't use it but you'll still have credit history until the account falls off your report-10 years)
First of all, you can have an excellent credit score without paying a penny of interest. All you have to do is buy things with your credit card, and pay the bill in full when it arrives. You will never pay any interest when you do this.
Second, the people who measure risk for a living have determined that people's history with small amounts of debt is indicative of their ability to manage larger amounts of debt. Do you think their actuarial models are incorrect, and if so, why?
Furthermore, it's not like a good credit score is all it takes to get a mortgage. Proof of income matters too. As anyone who bought a house since the 2008 debacle will tell you, mortgage lenders take great pains to verify borrowers' income and the source of the money they use for their down payment.
> You could instead just look at the history of their debit card usage to figure out whether they are trustworthy.
No, you really can't. A debit transaction is a direct deduction of money from a checking account -- it is not debt. The only thing that can go wrong is an overdraft, and even when that happens, the payee will probably be unaware of it. Debit is more similar to cash than it is to credit. People have very different psychology and behavior when they use debt instead of cash.
There are plenty of problems with the credit system in the US, but the things you have identified as problems are not real problems.
Second it's a fairly know issue that the way creditscore is established is pretty flawed. You can have 10mio on your account, but if you have no job or own your own company it will actually affect your credit score. This whole thread is started because of some of the issues.
With regards to the debit card the point is that the kind of purchases you did before you got a credit card, aren't going to change dramatically or fundamentally after you get one.
That's not true. Your FICO score does not take into account your employment status, nor your income.
> With regards to the debit card the point is that the kind of purchases you did before you got a credit card, aren't going to change dramatically or fundamentally after you get one.
If that were true, it would contradict your earlier argument that "most people don't use it like that which is why it's such a good business." Your statements cannot both be true.
The American economy, and largely the world economy is based on accusation of debt.
If everyone in the US, or other First world nations simply started living with in their means, never incurring debt the entire of the world economy was cease.
Thus the credit system is design to reward people that acquire more and more debt and punish people that save or live frugal life styles with in their means
The modern economy depends on a person gathering debt from their 18th birthday until their death, where the assets of their life are then sold to cover those debts ensuring the next generation also has to acquire debt repeating the cycle.
They are trying to bring something like that to Brazil too. Fortunately, it's opt-in, at least for now.
I felt pretty "trusted by definition." Citi gave me a credit card with a $3,000 limit as a college freshmen. A few years later I had an $8,000 limit card and a $10,000 limit card.
I bought my car certified-pre-owned under a program that writes favorable low-cost loans to recent college graduates with no or limited credit history (with an offer letter or paystubs).
You just aren't trusted with housing-sized amounts of money until you demonstrate responsibility with smaller dollar values first.
>basically creating debt and then paying it off
This depends on your definitions a little bit. You don't need to carry a balance and you certainly don't need to pay interest. You just need to create low but nonzero utilization on a credit card, pay it off every month, and not do anything else that might screw up your credit. I suppose you have debt in the interim between making the charge and paying it off, but most people don't consider it to be "credit card debt" if it goes away between statement cycles.
This is not something that you can have different opinions about it's how the US credit history system works by definition.
Not saying one is better than the other, it's just how it works in the US.
- Credit card utilization (balance as a percentage of available credit at last statement close)
- On-time payments (you just have to pay the minimum required by the date specified for it to count)
- Derogatory marks (collections, bankruptcies, foreclosures and liens)
- Average age of accounts (this favors older people who have been using credit a long time but not opening a lot of accounts recently)
- Total number of accounts (also rewards a mixture of types - car, student, credit card, mortgage, etc)
- Hard inquiries (very slightly dings your score if you're currently looking for credit, punishes you harder if you're desperately applying to everything you can find because this indicates financial emergency and therefore high risk).
https://www.creditkarma.com/article/credit-score-factors
If you use CreditKarma, it'll explain all this and how the values on your credit report fit in to the averages.
I am in no way affiliated with freecreditreport.com, it's just a site I find incredibly useful. It's now owned by Experian and it gives you your Experian FICO 8 credit score. They break down each part of your credit score and grade you on each. (A-F)
There's other sites like credit karma that do similar but they use vantage score which is also known as FAKO score and isn't used by lenders but is a good indication of what your FICO score may be.
I did not have that, or any cosigned loan.
I don't understand exactly why I am being down-voted.
The system is at it is it's not something I made up.
This has to do with your chance of getting a credit card to begin with. There is a difference between being a US citizen having had bank account most of your life and then being a foreigner who just got yours.
Not sure why you keep insisting I am saying something else than I am.
As a personal anecdote, I avoided credit cards until age 31, but had a bank account with Wells Fargo since I was 16. Because I had no history, almost no one wanted to give me a card despite my high provable income. I got my first credit card with capital one (for a hilarious 300 dollar limit).
But two months later after I became a known credit card user I started getting credit card offers in the mail from a variety of sources -- Wells Fargo offered me considerably more credit than the others, presumably because some system of theirs thought I was more trustworthy (long-standing account history? Actual visible income in the bank account?) They even offered me a rewards card even though I only had 1 month of history.
But please point to where I am wrong about the credit score system.
> You are american you have a history and your parents have a history.
Parents have nothing to do with anything unless your parents cosign or add you as an authorized user on their cards. Being American has nothing to do with anything other than some cards require you to be a US citizen for some reason, my BVAA card does for example. My parents are scumbags and their scummy-iness doesn't effect my ability to build credit.
The trick is to apply for the right card, different lenders/products target different populations. A store card or a secured card is a good start in building credit, that's what I did when I was young and had practically zero income. My limit was like $300 but it was enough to get me on the map. I didn't have to deal with being rejected because I applied for the product that fits my life situation. If you just apply for the heavily advertised cards you are not going to get a good result. After that I applied for a crappy card I was "pre-approved" for that came in the mail. Once you have a credit history you're going to get offers in the mail unless you opt-out.
Getting a charge card (which is not the same as a credit card) may be an option too, not sure on that one.
>The question is not about your credit score but about getting the credit card to begin with. Once you get the card they assign you a credit score but in order to get it you have to start building debt (and as a foreigner I had to do that with my own money)
False, you don't have to have any debt to get a credit score. Having credit available to you you don't use is enough.
First you say
>You are asked about assets, income etc. but those things have very little effect on whether you get a credit card or not.
Then you say:
>I wasn't talking about credit history but about history as in, a customer in a bank for years. These are also factors for how easy/hard things like this is.... There is a difference between being a US citizen having had bank account most of your life and then being a foreigner who just got yours.
Those things are mutually exclusive and both can't be correct.
>There are plenty of other ways to credit companies could gauge inside your economic maturity as much of your financial history have been done via debit card for more or less the same transactions that you are going to use your credit card for... You are not suddenly going to become financially irresponsible just because you get credit
This is beyond false and laughable. Nobody gives two craps about "economic maturity" they want to know "is this person likely to pay back the loan?"
>Second it's a fairly know issue that the way creditscore is established is pretty flawed.
It has its limits but are you questioning actuaries that crunch these numbers for a living? I mean, I'm assuming they have a reason and numbers and there's data to back it up and they just didn't say "lol, lets make up some shit." If they were getting bad results and losing money they'd change the algorithm.
> I live in the US so yes I have a pretty good idea of how it works.
Almost no Americans have any idea how "the system" works, its very specificity knowledge and there's tons of myths. You know how many times I've heard people say "my credit is terrible, its around 750?" 750 is an excellent score. People get credit reports confused with credit scores and all kinds of "I heard," "I assume," etc.
The very fact that things like how much you have on your savings account can affect your ability to get a credit card disproves your claims.
You might yourself be the one who have "heard" and is "assuming" things which plenty of other commenters in this thread shows.
Instead, they will issue you a 'secured' credit card, where you get a $300-500 limit on a card against the same amount paid to the bank as security. Only after a year or 2 of this, will the bank actually issue credit.
Maybe you had an account/history with the bank for a while, and that made a difference?
I am not talking about credit card history but about history of being a US citizen, having a bank account etc.
I think a lot here are missing the point.
The question is not about your credit score but about getting the credit card to begin with. Once you get the card they assign you a credit score but in order to get it you have to start building debt (and as a foreigner I had to do that with my own money)
Unless: Someone has them cosign for a loan or credit card. This is somewhat common with a first car loan or some student loans, but less common with credit cards. They won't be able to do that if they have a low score.
Otherwise, you are basically on your own. The credit stuff you would have experienced coming here is what many 18-year olds hav to deal with. Some older women find themselves in a similar position - the accounts were all in their husband's name.
Perhaps one's parents can't help in any formal way, but for me, my parents' creditworthiness and relationship with a local bank helped get me my first credit card.
Right before I left home for college, I applied for a credit card with my local bank, and was initially declined. When I asked for reconsideration by the branch manager, he looked into the situation and indicated that he couldn't do anything to assist.
When my mother found out I was declined, she took me back to the branch, and asked the branch manger to reconsider the credit decision. Upon a review of my parents' standing with the bank, the branch manager overrode the previous decision and I was given a Visa card with a moderate ($1000 USD) limit. My mother wasn't even asked to co-sign on the account, provide any kind of guarantee, or be associated with the credit card in any way.
With regards to credit score, of course, I never said it did.
With regards to getting a first credit card thats simply not true. Maybe if you go into a bank and open an account but if you have had a relationship with that bank for several years it is going to help you get one to begin with. Of course it helps you if you have had a history with the bank. And of course there are americans who can't just get a credit card thats still not what I am talking about.
I know plenty of 18 year olds who never had to deal with what I had and no matter what it doesn't really change anything from my original claim which is that the US credit history system is built on distrust not trust.
Citibank offers customers credit cards based on how much they have on their savings account. So it's simply not true that history doesn't help. Of course it does as it should.
You also don't have to start building debt. Having a credit card you don't use is enough.
The way it works, is they usually only give someone a $500 limit, then double the limit every 6 months If you pay monthly.
Once you get a job you can get a bump to $2000 limit with the 1.5% back easy. You just need to get a job for that.
I'm 1.5 years out of college and have access to ~100k in credit cards with a score of 750. I started with a score of 540 1.5 years ago. It's really not hard at all.
I just have a lot of cards. If they want to give me bonuses for signing up I will take them. Free money.
Plus usually you can call and get the second year free too.
Regardless, I can cancel w.e. and the increase in my credit score is worth it. At the moment if I want to buy a house (for example) I get the best rates on loans
It increases your score because you have a lower credit utilization and you have more available to you (supposedly signaling how responsible you are).
My credit report (free from my bank) tells me my score is slightly lower than it would ordinarily be because of how short the card history is. I still get a couple "pre-approved" card offers every week and the occasional offer to raise a limit, but I just shred them.
At this point, I have enough credit from credit cards alone to buy a small house.
It doesn't matter how many times you swipe your card, you can get a card and never use it and and still counts for your credit history. The point being you have credit available to you but you aren't using it. You have four years of not running up your credit card, that's huge.
EDIT: Huh, apparently I've been ill-informed about credit history [1]. Guess I've been a dumbo and one of today's lucky 10,000.
[1]: https://www.reddit.com/r/personalfinance/comments/188xmi/is_...
FICO is based on your credit utilization (amount owed vs credit limit), history of repayment, mix of types of accounts (this has a minimal impact), number of new accounts, number of credit inquiries (aka hard pulls, this is also minimal), and length of credit history.
You had credit available to you for four years and you manage it very, very well.
Other scoring algorithms besides FICO may weigh different things differently but FICO is currently used in most lending decisions so it's what matters for now.
If you want to see your real Experian FICO 8 credit score for free you can do so at freecreditreport.com which is a site now owned by Experian. They break down each part of your credit score and grade you on each. (A-F)
How old are you? Just a few years ago, despite making a very decent amount of money and having no marks on my credit, it took an entire year for me to get a credit card. Reason: lack of credit history. A lot of people have similar stories.
>This depends on your definitions a little bit.
The part where you spend money that isn't yours and then pay it off later. That's debt.
Personally, I've learned the game so to speak and now continually get out outrageously good offers for cars, credit cards, home loans, you name it. I have a about $90k~ worth of available credit to me on my CC's alone. But despite having an incorrect black mark for a medical bill that's reported by _ONE_ CRA (the others removed it after I gave them proof that the debt wasn't valid, Experian refuses to listen and because it got reviewed once they won't review it again), I get better offers now than I did when I had a squeaky clean record.
It's an absurdly backwards system. Get debt to get more debt. Hope CRA's don't fuck anything up. Credit card management has no indication how I'll manage a loan (whether a house or car) due to the nature of spending and utilization, but financial institutions treat it as such.
Quite frankly we need "stricter" credit laws across the board.
1. Start out with a "default" score at the very least.
2. Cap interest rates on CC's (20% APR is stupid). No reason a CC should have an interest rate of above 12%.
3. Don't allow medical debts to be displayed in pulls from CRA's. If the institution really wants to see "everything", make them pay a decently high fee for it. They must also explicitly state that in their loan consideration for you, they took into account medical debt. Craft laws around whether or not financial institutions should be able to consider these debts, depending on the loan being offered.
4. Prevent employers from pulling credit history. Your finances are not their business.
5. Prevent landlords from pulling credit history. They are not loaning you money. If they want to pull your credit history, then they need to also contribute to it positively (i.e. report payment history during the length of your lease, accurately).
I disagree, if you have a terrible credit history, leasing to you may be very risky. They aren't loaning you money, but they are trusting that you will have the money every month to pay them with.
Even more importantly than that: the lessor gives the lessee custody and (limited) care-taking responsibilities over what, in most cases, represents a significant investment of capital.
it's me, the tenant, who is loaning money to my landlord.
I don't really understand why, but it's way easier to get a credit card with no history if you are in college. People who would easily be approved as a senior in college will get denied 12 months later. It's stupid that it works this way, but some of the best financial advice you can give a college student is "get a credit card before you graduate."
> 4. Prevent employers from pulling credit history. Your finances are not their business.
This resonates intuitively with a lot of people (myself included), and is actually the law in 11 states. There are some interesting subtleties that should be considered before making up your mind though. In brief, the practical impact can make things _worse_ for some demographics often assumed to benefit from this type of legislation. A mass market article: https://www.washingtonpost.com/news/wonk/wp/2016/03/23/the-l...
The original research: http://scholar.harvard.edu/files/shoag/files/no_more_credit_...
> 5. Prevent landlords from pulling credit history. They are not loaning you money.
If all goes well, they aren't loaning you money. However, in most states it takes at least a couple of months to lawfully evict a non-paying tenant. So landlords are implicitly offering to loan tenants a few months rent.
I never understood this - why is someone else asking for your credit history a ding on your credit report? It seems really silly to me, but I must be missing something.
Inquiries only affect your credit when they're from someone whom you've authorized to pull your credit as a potential creditor: https://www.nerdwallet.com/blog/finance/credit-report-soft-h...
How many cards do you have? I understand it's mostly theoretical but I'm wondering why would anyone want to use their high-interest credit card to borrow even a few tens of thousands? Or any high-interest vehicle of debt for that much money, for that matter.
>but I'm wondering why would anyone want to use their high-interest credit card to borrow even a few tens of thousands?
I don't know, but I'm sure as heck not going to utilize them that much! I am sure the credit issuers wish I did though.
Some credit cards have promotional low or no interest rates for a year or so. You can then balance transfer to another promotional rate card at the end of the year. Also many issuers (Barclaycard, AMEX, Capital One) have low or no interest rates for active duty military.
Here are a couple ideas: lawyer fees during a contested divorce and emergency spending from being out of work too long.
I think the actuary-types who design the scoring models would disagree vehemently with this one. Scoring models are built from regressions on actual default rates.
It's one thing to say "I see you've been late on a few of your car payments, so we're going to give a higher interest rate." and it's something else to say "You have a few unpaid medical bills/late CC payments so we're going to give you a higher interest rate on this car loan."
I just have a hard time really believing that is the case. Often credit issuers simply look at the totality of everything, instead of appropriately looking the history of the specific financial contract they're wanting to issue.
That doesn't mean that systematic failures can't happen, but they're pretty unlikely. It's much more likely that you underestimate the correlation between these disparate defaults than that the banks overestimate it.
This quite literally happens already.
As a recent immigrant I felt pretty untrusted. In my late 20s, despite being able to show a year of income in the six digits, no overdrafts, I had to go to four separate banks before finding one that was willing to give me a $300 limit card.
It makes logical sense. Is it fair? I don't really think so, but its at least logical.
So there are other ways than the US one.
I mean, it's not great, but you have to start somewhere, and I've only been here 9 months. Was very frustrating to have to start from scratch when I have good credit in my home country, but completely understandable.
The really frustrating thing is how your credit score influences everything - apartment hunting, mobile phone contracts, etc. That's the only reason I'm trying to build my credit at all here. It feels like having a bad credit score puts you at a distinct disadvantage in the US, which is something I've never felt before.
Until you do those things, you are most likely going to get denied high-ticket loans such as mortgages and car-financing.
I wouldn't necessarily agree with a gut reaction that positive credit scores are absurdly backwards. It makes sense that I would trust someone more as a borrower if I know they have repaid debts in the past (versus having no history at all). The system could probably use improvements and more regulation, but I don't think it's fundamentally off base.
Remember our banking system in U.S. pays politicians to create laws that benefit them. It's actually not much a stretch to even claim they own the country between ex-bankers doing the regulations, bankers paying off politicians, bankers getting bailouts, the Fed, and bankers obviously controlling financial backbone of economy. So, I always consider whether this could have impacted a law, standard practice, or whatever.
Well, one thing they like is you buying stuff with their money and paying interest. It's basically how they all make money outside things like fees and services. Guess what our "backwards" credit system forces us to do. You were absolutely correct if you guessed "guarantee billions in profits for bankers." I'm not sure if they created the original model but it should be on list of possibilities to consider given they pull lots of stuff like this.
Another example they probably paid politicians for is how they do tax write-offs on charged-off loans they're not going to collect. The reasonable parts are them not paying taxes on loans they can't collect and borrower paying taxes on amount they borrowed because it's effectively income. The sneaky modification they also write off the interest and fees they charged on top while borrower pays taxes on those as if they were income. Interest and fees certainly aren't income. This scheme works great for banks and IRS but not consumers.
I don't think it's accurate to describe the system as starting out not trusted. There are many levels, and misbehavior can easily give you worse credit than the default. You start out neutral and then go up or down depending on what you do. Which seems like exactly how it should be.
There are plenty of other ways to credit companies could gauge inside your economic maturity as much of your financial history have been done via debit card for more or less the same transactions that you are going to use your credit card for.
In other words the information is there already because you have been using your debit card already.
And yes it is accurate to describe it as not trusted which is why you need to increase your credit score by using your credit and paying it back.
Credit score is one of many pieces of information used in lending.
Alternative credit scores are starting to come on the market for people who pay bills on time but may not otherwise have a traditional credit history but they are pretty experimental still. There's different algorithms too. The current one used most often is FICO 8 but there's a LOT more.
Each lender has their target borrower too. Some lenders are what is called subprime lenders meaning they lend to people with low or limited credit histories.
Debit card use makes no sense and is irrelevant.
You are asked about assets, income etc. but those things have very little effect on whether you get a credit card or not.
You can't go into debt using a debit card because you are spending your own money you already have.
These are much better indicators of your ability to handle money than spending money and paying it back to build credit history.
Again it works in other countries and so of course it can too in the US.
Both scenarios are fundamentally impossible with a debit card, so I really don't see how there's any relevance here. It's not the purchasing end that they're interested in, it's the paying-it-back part.
Thats not really important here.
You are not suddenly going to become financially irresponsible just because you get credit and yes you can determine someones financial responsibility by looking at their debit card usage that is why you can actually convince someone if you get rejected to look at your case again to show them additional information. This is why you can get a credit card in citibank if you have 25K in your savings account for 3 months straight and so on.
A ton of people suddenly become financially irresponsible just because they get a credit card. It's a massive problem, and that's why companies want to see some history. Being responsible with a debit card where there are hard limits on how irresponsible you can be doesn't mean a whole lot for how you'll be with a credit card.
The problem with people using the credit card lies as much in the incentive structure of getting points, building credit etc.
And it's obviously speaking against your claim that so many american have issues with their credit cards given that the very test your claim is necessary is failing on so many.
So no I understand the balance pretty well.
Uhhhhhh... You haven't been in the United States for very long, have you?
But you can't see the forest for the trees.
You have to do the same to get a mortgage in UK. And that's why I need a credit card
This seems backwards to me. The proof that I am good with money is that I have never been in debt. When I got my home loan the additional proof was having a deposit.
This is not legal anymore, as much I know, but still also in Germany, your fate is sometimes bound to the street, in which you live, instead of your own behavior.
The 'Cancel Membership' page is hard to find, but here it is:
https://membership.tui.transunion.com/tucm/cancelMembership....
Is anyone working on it? Seems like a lot of money just sitting on the table.
In case of Hello Soda they are using social media data for credit scoring.
PS I'm not associated with any of these companies.
As a result, I've spent at least 1 entire calendar month in the past decade to "disentangle" our credit reports. With Equifax it wasn't finally resolved until I showed up unannounced at a regional office in a suit.
Yet again, we're entangled with TransUnion (after last resolving it 18 months ago), with me having to enter security questions as if I were my father in order to confirm my identity.
The most maddening part is it is extremely difficult to talk to someone in the US if you have a problem with any of the large three bureaus.
Social security number as globally unique ID would actually improve security and accuracy in most areas of life!
But numbers. Scary! What if I actually have something to hide?