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Comment by Kranar | Hacker News Reader

>The credit score system already in place in the US is frequently as arbitrary in some cases already.

The credit score system is not arbitrary, it's a specific formula that applies equally to everyone.

>You get punished for just looking at it.

No you do not. There are hard inquiries and soft inquiries, and an individual viewing their own credit score is considered a soft inquiry which has absolutely no effect on your credit score.

As for Europe, there is no one homogeneous answer. Different parts of Europe handle credit differently. The UK and Germany are very similar to the U.S., whereas in France there is no concept of a credit rating or credit score.

With that said, generally the countries that do not have a credit scoring system are much harder to get a loan from.

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> it's a specific formula that applies equally to everyone.

That doesn’t mean the formula is reasonable or transparent. An AI is also a specific formula that applies equally to everyone. It’s about how the formula takes “weight” on the individual’s differences.

> There are hard inquiries and soft inquiries

Why there are “hard inquiries”? Why someone else inquiring my credit score should affect my credit score?

I certainly don’t love the system, but the difference is “checking credit score in order to take more credit (eg a loan or credit card)” (hard) vs “checking credit score for my own knowledge” (soft). This distinction feels reasonable to me.

How is it reasonable? Anyone checking your credit score already knows that you're applying for new credit, because you're applying for new credit with them.

Dinging your score over that only punishes you for soliciting credit offers from multiple lenders at once so you can choose the best terms. Which ought to be an antitrust violation.

It's a defense against the double spend problem. It minimizes potential timing issues that could allow someone to simultaneously taking out multiple credit lines without the ability to properly evaluate the risk.

But it isn't, because the reduction in credit score from the query doesn't necessarily prohibit two simultaneous loans, it just makes the terms worse (and so makes default more likely).

And there are obviously better ways to prevent "double spend," like reporting the new loan being granted, which actually should reduce the credit score due to the new debt. It's not as if we can't make computers capable of updating this information in real time.

The interesting thing I've noticed is that opening a new credit account often doesn't actually get that information on your credit report. It sometimes only shows up after you've made the first payment (either loan or credit card). I wonder if that's why the system dings you for too many hard credit inquiries. I agree with you that there's no reason why this couldn't be fixed, though.

Or rather it discourages people from attempting to apply at multiple places to get the best offer..

Typical rate shopping is not discouraged: https://www.experian.com/blogs/ask-experian/do-multiple-loan...

That's usually not the case, though. I was just looking around at Chase's credit report tracking thing, and they have this to say on credit inquiries:

> The VantageScore credit score model takes rate shopping, e.g., for a mortgage or car loan, into consideration. All inquiries for mortgages, auto loans and major credit cards that appear in your credit file within a 14-day window are interpreted as a single inquiry.

I believe that's the case for the FICO score algorithm as well. I think a 14-day window is probably too short, but it likely does cover most situations.

But if you're applying for, and repeatedly being rejected for, extension of credit by third parties that is absolutely something a pre-existing lender would reasonably consider when thinking about risk.

You have to understand that there is a no "credit denied" feedback into the credit rating system. The standard pattern for an approved credit application is a hard-pull followed by the opening of a new tradeline, both of which affect your score. If you're applying for credit, but not being approved, then that just shows up as a hard-pull with no new line.

The FICO score is also set up specifically to ignore additional hard-pulls for the same type of credit within a bounded period; so if you go shopping for a mortgage (or an auto loan, or a student loan), then multiple queries within a 30 day period are coalesced, and only count once from a scoring perspective.

I dont think its unreasonable for one’s credit score to get dinged if half a dozen lenders check their score - that means the consumer went through the initial stages of trying to get multiple loans.

But more importantly the ding is maybe 10 points which is pretty much irrelevant to the “buckets” that define credit worthiness (>800, 700-800, etc).

Plus individual lenders can look at the report themselves and make their own determination.

> An AI is also a specific formula that applies equally to everyone.

AI’s are not “a specific formula” and not only that, it’s decision-making is opaque to humans.

>That doesn’t mean the formula is reasonable or transparent. An AI is also a specific formula that applies equally to everyone.

You can learn literally everything you need to know about how the FICO credit scoring systems works in probably two or three hours of dedicated research, even though the model itself is a trade-secret. When lenders deny credit, they're legally obliged to provide the specific reasons why.

This is not-even-in-the-same-ballpark as AI, where no-one can even tell you how inputs relate to outputs, not even the creators.

https://www.cnbc.com/2019/02/27/american-consumer-credit-rat...

https://www.ftc.gov/news-events/news/press-releases/2013/02/...

It's one of the few things thats so obvious its bipartisan. I'm amazed you think its worth defending. There should not be a punishment for LOOKING at a credit score hard or soft, that's insane.

To require someone take on debt in order to have good credit is pretty arbitrary. You can have all the money in the world, but no debt? you're fucked. The fact you can juice your credit with someone elses credit cards is also really arbitrary.

You're misunderstanding the point behind credit scoring.

Banks lending you money don't care (at least not as a primary concern) how much money you have, their first concern is whether you have a history of paying back debt you owe. A credit score scores you on your ability and willingness to pay back your debts on time.

And yes, this means someone who takes on debt with a credit card only to immediately pay the balance before any interest accrues both has a stellar credit score and no debt in any practical sense.

This also means someone who is making their house or car payments properly also has a good credit score, outstanding debts negatively affecting the credit score slightly notwithstanding.

> You can have all the money in the world, but no debt? you're fucked.

No, you’d be totally fine paying cash for anything you needed.

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