It is a stunning example of a bad idea. Facebook patented a tool to track people’s credit risk based partly on their friends defaulting on loans. Isn’t this crazy?
The article talks about historical risk and the risk that banks try to judge based on present credit models. Everyone wants to be repaid, but how often those models are just simply wrong. I have worked for rich people and rich people often don’t pay their bills. Where are the companies that fault them?
For example, one rich person I knew didn’t pay anyone who worked for her. Yet she had a stack of credit cards. Where is the model that protects the bank from that? On the other hand I have known poor people who paid everything they could to predatory companies like short-term title loans or so on, and they were marked down as bad credit risks?
Isn’t it crazy that being sick and being laid off of a job are the biggest risks to someone having a good credit score? You might as well re-title a credit score as someones “lucky index” about how lucky they have been to avoid sickness and job layoffs.
Yes I can hear the people now with good credit saying “Well it was hard work and character that got my credit score. I paid my bills, and I am a good member of society.” Great, I’m glad for you, really I am. However not everyone is in your position. For the vast majority of people who are not genetically lucky, or have steady work, this credit system is anything but fair.
My way of responding to the credit system is to buy as little as possible. I try to support small businesses when possible, and to find the most economical companies with the best support. Very difficult to do, but possible. As a society we have to demand with our money respect from those we do business with. It is our right and our choice what we support.