The Progressive Arrogance

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So, credit scores are the next thing which must be regulated – that is, directed and planned by politics. Neatly allowing us to see the vapid arrogance of this progressive project.

When we next get a progressive administration, an early order of business should be regulation of credit scoring

Why’s that then?

And the scoundrels who run (unregulated) private credit-scoring companies, like FICO, have imposed idiotic standards that make it even harder. For instance, if you apply for credit for perfectly defensible reasons like lowering your credit card interest rate, the very fact that you apply can lower your credit score. Presumably the algorithm thinks you are about to go more deeply into debt.

It’s not possible for a very clever person like Robert Kuttner – and be in no doubt, Kuttner is very clever, he’ll be the first to tell you so himself – to work out why an application for credit might be useful as a measure of credit worthiness. Therefore we should go change the law so that this cannot happen. Stands to reason, amirite?

True, none of us instinctively know why credit scoring companies do it this way. We could probably go find out but before we do that we have at least a thought process that aids us. They do it because they think it’s useful. And people buy their product because they think the way they do it is useful. That is, users of credit scores find using an application as a guide to be a useful part of the process.

Those who don’t use that as a guide are providing an inferior product. Those who are regulated out of doing so are just clearing the market for those who will do so – whether legally or not.

Which is where that progressive arrogance comes in. Peeps use certain methods of determining credit ratings. As I, that clever progressive, haven’t the slightest idea why they do they must be banned from doing so. Because I, that smart guy who would run the world, don’t understand then it must be idiotic, of no value, possibly even counterproductive. For it’s not possible that I, that clever guy, might now know everything, right? If I didn’t know everything then I wouldn’t be able to advance the argument that everyone must do as I say, would I?

Yup, Fico are just idiots and I, Kuttner, know better.

And if that ain’t arrogant then what is?

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jgh
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jgh

I don’t understand why people would have model railways, therefore they must be banned.

Spike
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Spike

Disclosing your opinion of someone’s creditworthiness, like disclosing your opinion of anything else, is a freedom-of-speech issue. The controversial part is collecting financial data, including through third parties without your permission, to form that opinion. This is the electronic, nationwide version of the town gossip, and as unlikely to be in your interest. US law lets you tell the credit-reporting agencies not to publish you, but it’s an opt-out, and having no score is a mark against you, not just in getting credit; but also a job or an apartment. The other transactor needs assurances because government has constrained firing… Read more »

Phoenix44
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Phoenix44

Some states have banned the use of credit scores for job applications, which of course led to fewer minorities being hired. Employers know that some groups have on average higher “bad” characteristics than others – absenteeism and walking off the job for example – but used credit scores to move away from simply using those averages in a blunt way.

But because credit scores for minorities tend to be poorer on average, they were banned. So how employers have only the blunt tool.

Spike
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Spike

Yes, without complete information, everyone does and should discriminate. Even Jesse Jackson famously said that in some cities at night, he would cross the street to avoid a group of black youths. So the state boldly prevents complete information!

I suggest above that government restrictions on firing made employers want more information before hiring. So note that the ban on credit scores is government acting to solve a problem that it created.

Annonymong
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Annonymong

The lowering of credit scores for credit applications occurs (or at least did when I was in the industry) after multiple applications as it was seen as desperation for money (and hence reduced ability to repay) and that the applicant had been refused (and hence further reduced ability to repay.)

The intervention of the state in this type of area is hardly a stunning success. In the US financial institutions were fined for asking for a deposit for mortgage as it was deemed racist, a move that helped pave the way for ninja and other sub prime loans