>> And it’s not even just used for credit anymore, renting an apartment now usually requires a credit check.
Renting an apartment is credit, I am not sure why you view it has something other than credit?
The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments
How is that not credit?
A better example is employers using it for hiring choices which does happen as well, but using an apartment as an example of bad uses of credit I think it misguided
>>. It turns out, the whole idea of a credit score is kind of a lie. Your credit report can be pulled by creditors, and creditors can interpret it in different ways as they see fit.
Yes the individual or organization that is loaning you a large amount of money can choose how they use the credit report they obtain for you. Again here I am not sure why this is a revelation or a bad thing.
There are also many different and competiting credit scores no person as "a credit score" there are at least 5 if not more credit scores out there and different institutions will use them in different ways. FICO being the most common but not the only
>You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report.
Yea I believe these institutions should also have to release your personal score with your annual free report, Congress should fix that omission from the law.
>Renting an apartment is credit, I am not sure why you view it has something other than credit?
>The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments
Not really. In most places you have to pay first and last month's rent, which means you're paying for the service before it's rendered. Therefore they're not extending credit, as you have already paid for the service in advance.
1. I would like you to define "most places" as for the first 35 years of my life I was a renter and in that time I only ever had to pay "First and last" in one instance. Most of the time it was The first months rent, and security deposit(which was often something small like $100 or $200), no "last months rent" so around here it was not "most places"
2. Even if you use that as a metric that is more like a down payment than a "services paid in advance", unless you are on some kind of month to month with no lease. Every lease I have ever signed shows the TOTAL of all payments which are paid in 12 installments just like a loan, if on month 6th you just move well you still owe the other 6 payments (less any down payment aka last month you prepaid)
The owner is absolutely extending you credit for the use of the property, If you sign a lease for an apartment for $1,500 a month for 12 months you are agreeing to pay $18,000 to the owner for the use of the property, you have both agreed to pay that over 12 equal payments, and in your hypothetical the owner has asked for a $3,000 down payment on that loan in exchange the owner adjusted the terms to 10 equal payments
I'm not sure I follow here. The transaction might be structured as the landlord giving you 12 months of housing service at the time of signing of the contract (or when the lease starts) and you paying him in installments of 12 payments (with the first one or two upfront), but you don't "take delivery" of the service all at once. It's given to you on a continuous basis. Therefore, at any moment during the 12 months, you don't owe the landlord anything.
The second you sign the lease you owe the landlort the full amount. It is a debt you owe.
Does not matter if you realize the use of the property or not, for example if you signed a Lease on an apartment in January, then due to a global pandemic you could not move (through not fault of the landlord) in until July you would still owe the rent for the 6 months even though you did not occupy the unit.
Renting is not credit because you don’t get the thing all upfront and then pay for it later. If fact if anything, the renter is giving the landlord up to one month of rent as credit because rent is usually due on the first of the month in order to be able to live there that month. But that’s just sort of an artifact of the discretization of the payment, as far as the arrangement goes there is an ongoing equal trade of values between both parties.
As far as banks being able to make their own credit decision, that’s all fine and good but then they pretend like that’s not what’s happening. If I ask a bank why they denied my loan, they won’t tell me about the specific activities I’ve done that prove me un creditworthy (sometimes I can press to ask what they can see on my report and if they’re feeling nice they may tell me, but they don’t have to). The fact that there’s no party you can ask to just evaluate ahead of time what the result will be, or to see what i can do to get myself above the threshold, so the individual is always at a disadvantage of information asymmetry, is what makes the system bogus. And then on top of that, just the act of seeing if you qualify for the thing lowers your credit score further!
If I’ve been burned by this as a high paid tech worker with just a couple of mistakes in my autopay settings in the past, I can’t even imagine how big of a problem this is for people who have had actual hardships.
>>Renting is not credit because you don’t get the thing all upfront and then pay for it later. If fact if anything, the renter is giving the landlord up to one month of rent as credit because rent is usually due on the first of the month in order to be able to live there that month
You have a fundamental misunderstanding of how a lease works, you are equating it to something like a prepaid phone bill, and that is not at all what a lease is
You are obligated the pay the full amount of the lease, if you up and move in the middle you still owe the landlord the full amount.
The property owner would run a credit check for the same reason as a lender would, to judge if you are responsible person that would repay this obligation under the terms of the agreement, it far closer to a loan then you seem to want to give it credit for.
Further the use of credit scores and other background checks only become more important the harder it becomes to evict bad tenants
Something that "there is an ongoing equal trade of values between both parties." would be terminable by either party the second that value proposition changes, this is not the case with Rental property where the interaction is governed not only by the terms of the lease but layers of federal and local laws
>If I ask a bank why they denied my loan, they won’t tell me about the specific activities I’ve done that prove me un creditworthy
If you scroll to my other comments I advocate for changing that, I am a big advocate of personal data ownership and believe any person should have the right at any time to request all data any company collected about them.
>> (sometimes I can press to ask what they can see on my report and if they’re feeling nice they may tell me, but they don’t have to).
You have the right to get an annual credit report from every credit agency every year, that is would they would see
>The fact that there’s no party you can ask to just evaluate ahead of time what the result will be, or to see what i can do to get myself above the threshold, so the individual is always at a disadvantage of information asymmetry, is what makes the system bogus.
Yes and no, there is 100% guarantee nothing is in life, but there are several ways you can get a good fact based analysis of your general credit worthiness, can it predict if a given institution would grant you a loan... no. but it can predict if you have a good chance at some institution giving you a loan.
The lower your general score obviously the less reliable these tools will be, If you have a FICO of 810 + provable long term income then chances are anyone will loan to you, if you have a FICO of 620 well that become more of crap shoot and will be based on many other factors than just your credit score, similarly if you have a high FICO score but unreliable income (self employed) then it also becomes more of a crap shoot.
>>If I’ve been burned by this as a high paid tech worker with just a couple of mistakes in my autopay settings in the past
I hear stories like this often but this is not my personal experience. Not saying it cant happen but companies I do business with do not insta report you if you autopay fails...
You have to be 60+ days over due before it shows up on the credit report... and with all the modern alerting and other tools I fail to believe that a "simple auto-pay mistake" is what caused one to become 60+ days delinquent on a payment
Renting an apartment is credit, I am not sure why you view it has something other than credit?
The owner of the property is loaning (credit) the use of their property to you for X amount of time in exchange for N amount of dollars, payable over monthly installments
How is that not credit?
A better example is employers using it for hiring choices which does happen as well, but using an apartment as an example of bad uses of credit I think it misguided
>>. It turns out, the whole idea of a credit score is kind of a lie. Your credit report can be pulled by creditors, and creditors can interpret it in different ways as they see fit.
Yes the individual or organization that is loaning you a large amount of money can choose how they use the credit report they obtain for you. Again here I am not sure why this is a revelation or a bad thing.
There are also many different and competiting credit scores no person as "a credit score" there are at least 5 if not more credit scores out there and different institutions will use them in different ways. FICO being the most common but not the only
>You can check your credit report for free, as required by law, but nobody is required to tell you your credit score. You can also basically just pay to remove many things from your credit report.
Yea I believe these institutions should also have to release your personal score with your annual free report, Congress should fix that omission from the law.