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Comment by acjohnson55 | Hacker News Reader

The book Weapons of Math Destruction talks all about this. I've come to believe that pure risk shouldn't be the only factor in a person's interest rate.

That obviously makes a ton of sense from a business standpoint. You want to contain losses for risky borrowers but compete with other lenders for low risk borrowers.

But socially, this is perverse. People tend to be risky because they are already poor. So now money costs more for those who have the least of it. This is one of the feedback loops that makes poverty (and affluence, for that matter) so sticky.

I had this realization in my personal experience when I was able to refinance almost $100k in student loans at a crazy low interest rate. My household's finances are in great shape as my wife and I enter our prime earning years. But for us, such an opportunity is a gift, on top of an already sweet situation. The savings could be a game changer for a family whose finances are more marginal.

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That's the irony of credit, plenty of it when you don't need it. It seems that the more money you have, the quality of investments that people approach you with increases too.

That's why pretty much the lowest common denominator is fixing the poverty problem manifests as education. Societies that make education one of there main investments will continue to reduce crime rates, increase social safety nets and second chances, and I hypothesize these countries will have most stable positive growth rates in there economies.

How do you operationalize that? If you are in charge of investments for a teachers’ pension fund, do you invest in less profitable banks because they have looser underwriting standards?

You can overdo fairness and cause troubles to the poor. Very concretely: Giving someone a loan, despite their credit score being marginal, will severely mess up their credit score forever, if they can't repay you.

If you are poor, then don't create more debt! It should be hard to rack up such a debt, not easy and accessible. No amount of credit is going to increase your social status, because you have to pay it back with your own current/near-future money.

If we want social justice for the poor through access to more money, then capitalism is not a good way to go. The state should become a credit provider.

How would someone’s credit score be messed up forever? Debts are cleared completely after 7 years and have less weight after about half way through that time. Bankruptcy is along the same lines.

So your example isn’t correct.

You still owe any debts after 7 years (up to 15 years in some states). Zombie debt is not "completely clear". But ok, read "mess up your credit score for 7 years" instead. Then point remains: Marginal high-risk credit underwriting is not only dangerous to the institution, but also to the receivers of the loans (and the economy in general). It is socially perverse to hook lower-income people to consumer credit. To have middle-income people lose their house.

Ten years. Maybe. If there are no errors on your credit report.

I don't want social justice infinite debt communism for the poor I want a working economy with opportunities job.

If you want social justice for the poor I recommend Venezuela.

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