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Comment by spaceribs | Hacker News Reader

Companies already have this service provided by the judicial system, it's called bankruptcy and it's a public record.

If theres a market for more detail than that, it's a bullshit market, because how that report gets generated is entirely arbitrary.

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US bankruptcy is not a service provided by the judicial system to companies. It's a service provided by the US courts to consumers. Our bankruptcy law is notably among the most liberal and consumer-friendly in the world.

From experience helping family members: you can be hundreds of thousands of dollars in debt before bankruptcy becomes a real option. Entire sectors of the consumer finance market are dedicated to keeping them out of bankruptcy, where they become total writeoffs to creditors. I watched creditors offer to settle mid-5-figure delinquencies for nickels on the dollar simply because that was the best they were going to get with a bankruptcy on the table.

The idea that creditors could simply extend credit uniformly to everyone who hasn't declared bankruptcy in the past is ludicrous.

I'm not suggesting that we do that, I am saying that not paying a debt outside of a predefined grace period is a contractual and legal issue, which would be a part of a civil dispute, and also a matter of public record.

How does that address the problem that credit scores solve? If I'm a lender given no data about a potential debtor and my only recourse is to the courts, I'm not going to lend to anyone --- or, if I do, it'll be based on far more arbitrary and discriminatory standards, like whether the right poobah at the local Chamber of Commerce vouches for you personally. That's how it worked before we had credit scores.

Never said we had to go backward, and I definitely don't think that's better. I am saying that the legal system is the demerit based system for this kind of reputation based decision-making, which has completely failed us in the proper function of this task.

You already acknowledged elsewhere the comment where I informed you why the legal system cannot function as a credit reputation service. We had the legal system before credit scores, and we know what the outcome of that system was.

Even today, people (in effect) steal thousands of dollars from creditors, essentially for sport, by exploiting the FCRA and the procedural difficulty of enforcing contracts and collecting delinquencies. The courts are not a realistic option for underwriting consumer credit.

I think we're pretty much on the same page though, the civil courts are not functioning correctly in this regard, but to me that doesn't mean the credit industry is the be-all end-all solution to the problem.

We really should be improving our judicial system rather than letting private industry determine what we as a society should consider when someone wants to take out a loan.

"People who have paid back previous loans on schedule are more likely to pay back future loans on schedule" is not arbitrary.

That is already described via bankruptcy.

That is not at all true.

You don't go bankrupt when you are late paying back a loan or miss payments or even default on a loan completely.

No it's not. You can be behind on payments without filing for bankruptcy. You can have a debt sent to collections without filing for bankruptcy.

There are all sorts of cases where a person is not trustworthy with money that do not show up in the public record. That's why credit bureaus came to exist, and although their business practices and data security leave much to be desired, I understand why they exist in the first place.

Credit bureaus came to exist because of this murkiness when it comes to contractual obligations. If you provide a grace period around a deadline, it's on you, and not something which should be punished against.

If they broke the contract, it's on you to bring them to court. Apparently companies thought it was to expensive to enforce contracts, so they decided to create this extrajudicial system.

My point is, if you can't physically pay your debts, you can file for bankruptcy. That is the public record.

The average duration of a contested civil court case is on the order of 2-3 years. The courts are not going to resolve even a significant fraction of delinquencies, and are not a real recourse in the main for creditors.

I agree! Until that aspect is solved, the standards of when you get reported and for what are entirely private, arbitrary, and have long-lasting effects on your overall wellbeing.

So, like, in a parallel universe where we reinvent the civil legal system, you might have a point? But in this universe, you concede that Equifax has a practical purpose?

I don't consider arbitrary systems practical. I don't define myself by what Equifax thinks of me, and neither should a bank. Unless a proper, accountable, civil system exists, call it for what it is: Bullshit.

I guess I can just accept that we're using different definitions of some of these words.

Arbitrary again.

To quote Inigo Montoya, you keep using that word. I do not think it means what you think it means.

It is arbitrary, why do you think it isn't?

Arbitrary means "based on random choice or personal whim, rather than any reason or system." Whatever problems you have with credit scores, they are robust predictors of people's likelihood of paying back loans.

Something can be accurate statistically but still be quite bad for those individuals for which it isn't.

Perhaps, but that thing will not be arbitrary.

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