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Comment by MaxBarraclough | Hacker News Reader

Interesting. A quick perusal online and it seems they get by with bank statements/pay slips/tax documents to show that you're on the level. https://www.quora.com/Is-it-true-that-theres-no-credit-score...

I'm surprised that works at all. I wonder if it's quantitatively less 'effective'. (A quick Google didn't turn up much on that question.)

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France (and other countries) does not use a FICO score. They mostly rely on your current income and to sometimes on your current wealth as collateral. But you cannot simply take the money, and never payback either. France has a central bank that has the power to freeze all your bank accounts/assets on the push of a button. Any bank can contact the central bank (even for an overdraft... happened to me :) and freeze immediately all bank accounts, credit cards, etc. And I don't know about loans for goods, but for real-estate, like here, until you paid your loan, the property is basically owned by the bank. Past behavior is not necessarily helping a lender to guess your capacity to payback in the future. If you act in good faith, you still can have issues (lost your job, health issue). As long as you sort it out the best you can with the lender, maybe you should not be punished for it later. I guess it is different risk management.

I think it's like that in most of Europe. It is at least in Estonia.

"the Bank of France maintains files which are only available to financial institutions holding a licence delivered by the Bank of France. The files only relate to a person if they have written bad checks, have participated in fraudulent activities, have been declared bankrupt or have bounced checks in France."

So the bank of France is a centralized credit bureau. So going by that, it's actually much more similar than different from the US system. The US system adds proprietary algorithms designed by actuaries to that rather than, or in addition to, manually underwriting. But it's not all that different other than being for profit.

We have many private companies act as data brokers here in the US, as opposed to a single central bank or government agency, because Americans hate government and love private businesses. The US is like "the government can't do anything, let private companies handle it and make money off it and the free market solves everything." We seem to be just learning that the free market can have problems too...

Designing a centralized government run system is a non-starter in the US. Even now.

> So the bank of France partly is a centralized credit bureau. So going by that, it's actually more similar than different.

Only by what data they gather, and this stems from what the data is needed for. There is vast difference in purpose, though: the Bank of France is (a) a public institution that (b) does not earn money solely by selling every personal data they could put hands on to just about anybody. The incentives are totally different from Equifax'.

Note also that the data collected is not even remotely about everybody, as with Equifax.

My point is

1) banks need this information for underwriting

2) the US doesn't have and won't ever have a centralized government/public database that contains this information

3) the private market takes over and compiles that information for profit

The Equifax problem was poor data handling plus a lack of government interested in punishing them for it. Neither of those problems would be avoided if Equifax was a government agency.

While I'm inclined to agree that it would be better to have the government run it, you seem to be suggesting that this would be an, uh, ironclad silver bullet, as it were.

Doing so wouldn't guarantee either good security or general system effectiveness.

A company I work at more or less does the same thing, albeit in conjunction with a credit report. We're a marketplace lender operating internationally, and (from what I hear through the grapevine) it turns out the accuracy of credit reporting data outside of the US can be, put nicely, inaccurate.

Aside from that, if you want a business process for vetting credit to work across geographies, you can't be dependent on a particular agency or report being available for a specific locale. You _can_ however, almost always depend on a business keeping books and paying taxes.

In the Czech Republic, it's pay slips/bank statements, or a work contract for mortgage (you cannot fire someone without a reason). There is a central government database of people who didn't pay a debt on time.

In Germany, also pay slips and work contracts. Additionally, there is a semi-private government-mandated company (I never understood why Germans don't complain about this) that maintains a database of existing debtors. You basically start with a perfect score and it decreases only when you don't repay on time.

There is a gigantic difference between who can get mortgages and at what kind of leverage one can get in Europe vs. United States.

Completely private and manual underwriting exists and always existed in the United States. The reason that it is not popular is that the vast majority of Americans would not qualify under any private underwriting guidelines for most of the loans Americans get ( and successfully pay for ).

How about better job security?

Not a replacement for a healthy lending.

Are you aware in Europe in general, there is much much less buying on credit?

I'd like to challenge you to show some sources and declare in what kind of metric you're describing. Per person/capita, per household? etc.

I know people borrow money like they're crazy over here in Sweden. For consumption, for housing etc. (So much for the liberal-a-land it's portraited as in US media)

How about mortgages?

Copy of employment contract. When independent, 3 yrs of yearly financial statements. SOP.

My point was whether they use mortgages in the first place. When you mentioned 'less buying on credit', that seemed the natural question to ask.

Dude, Wikipedia is right over there.

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