• edric@lemm.ee
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    1 year ago

    What I hate the most is how your score goes down for paying off a loan early. Getting penalized for actually being financially responsible is infuriating. I paid off my car less than 2 years into a 5 year loan and my score went down a couple dozen points. Just because they couldn’t get more money from interest.

    • LdyMeow@sh.itjust.works
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      1 year ago

      Interestingly our poster here has put the reason, I hadn’t thought about it that way, but how valuable you are to creditors is what the score is. Paying off early losses then some money, so score goes down. Hilarious. What an amazing system! ☹️

      • XIIIesq@lemmy.world
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        1 year ago

        The system isn’t for seeing how responsible you are, it’s for seeing how reliable you are.

        They seem like similar ideas but they are quite different.

      • Dkarma@lemmy.world
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        1 year ago

        That’s not why it went down. It probably went down because they had less credit extended to them after paying off the loan. How much credit you’re using affects your score.

        They don’t care that u paid it off early. They care that your loan to income ratio just took a hit.

      • LdyMeow@sh.itjust.works
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        1 year ago

        Oh goody. Just thought of another amazing use for ai! You could use it to figure out the maximum length and interest a single borrower would be expected to pay and set the terms on that! Wunderbar!

        • Zeth0s@lemmy.world
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          1 year ago

          You know there are people in bank and credit institutions that have been doing this for centuries? Probably millennia… EU explicitly requires that some of this is done by what you call AI (i.e. mathematical models) because they are fairer than humans and safer for customers and society

          Check basel III for an intro on the topic

          • Aceticon@lemmy.world
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            1 year ago

            Just a small correction because I worked around that area (not for loans but for investment), it’s all Algorithms rather than AI.

            Algorithms are basically mathematical formulas turned into code, whilst AI is a totally different beast that can produce quite different results on slightly different inputs and it’s not really made by turning mathematical models into code but rather it’s trained with real world data containing inputs and outputs and “somehow” finds the patterns in that data and can predict the correct outputs if given fresh, never seen before inputs.

            AI is probably used for fraud detection (and I expect nowadays it’s likely used in algorithmic trading to try and predict market movements) but unless a lot has changed since I was in the business, it’s not used for valuations.

            • Zeth0s@lemmy.world
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              1 year ago

              It was just to give an idea that what OP mentioned is already an established thing, fairer than alternatives.

              Most of the time trivial linear logistic regression is used in this context. Nowadays decision tree ensambles are pretty heavily used, which are ML. Simply they perform better with fewer data than neural networks on structured tabular data.

              What you refer to as AI is probably methods based on deep learning. The truth is that they work exactly as any other algorithm that you are referring to. They are used for regression and classification, same way as a standard linear regression. The difference is that the models are non linear, and their complexity is so that a lot of data are needed to train them.

              But conceptually one can absolutely create a credit score with deep neural networks. It is just an overkill, for performances that are likely worst than a random forest on relatively small training datasets

              Neural networks-based methods are indeed used in fraud detection

        • TAG@lemmy.world
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          1 year ago

          We don’t need more discrimination in loan approval. A few years ago, Amazon built an AI that would look at resumes and rate how likely the candidate would be hired. The AI trained itself to recognize female sounding resumes (went to women’s only college, is involved in women’s organizations, does not use manly enough language) and flag those as undesirables.

          https://www.reuters.com/article/us-amazon-com-jobs-automation-insight-idUSKCN1MK08G

              • kase@lemmy.world
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                1 year ago

                Ah ok. I don’t know much about it, but I’ve heard that AI could sometimes be negative toward commonly discriminated against groups because the data that it’s trained with is. (Side note: is that true? someone pls correct me if it’s not). I jumped to the conclusion that this was the same thing. My bad

                • adrian783@lemmy.world
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                  1 year ago

                  what it did it expose just how much inherent bias there is in hiring. even just name and gender alone.

                • SCB@lemmy.world
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                  1 year ago

                  That is both true and pivotal to this story

                  It’s a major hurdle in some uses of AI

                • TAG@lemmy.world
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                  1 year ago

                  An AI is only as good as its training data. If the data is biased, then the AI will have the same bias. The fact that going to a women’s college was considered a negative (and not simply marked down as an education of unknown quality) is proof against the idea that many in the STEM field hold (myself included) that there is a lack of qualified female candidates but not an active bias against them.

              • matter@lemmy.world
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                1 year ago

                When buggy software is used by unreasonably powerful entities to practise (and defend) discrimination that’s dystopian…

                • SCB@lemmy.world
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                  1 year ago

                  Except it wasn’t actually launched, and they didn’t defend its discrimination but rather ended the project.

    • db0@lemmy.dbzer0.com
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      1 year ago

      Damn that’s really dystopian. It’s a credit score that directly measures how profitable you are to others as a human.

      • jarfil@lemmy.world
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        1 year ago

        Since all money has switched to credit, “credit score” is the same as “money score”, and “worth” is the same as “con artist ability”.

    • grayman@lemmy.world
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      1 year ago

      The specific rule you point out is stupid but easy to hack. Your score didn’t go down because they lost the interest you’d have paid. When you pay off a secured debt, the loaned amount is deducted from your total credit potential, which increases your utilized credit percentage. The hack is to open a line of credit against the secured asset before it’s paid off or another line of unsecured credit. Your credit utilization will drop, thus increasing your score.

      My score is over 800 and has been for over a decade. I have like 12 credit cards but only use 2 and pay them off every month… Costco for the store and gas and a high cash back card for everything else. The others I keep open with 1 small purchase each year. Every store wants you to have one, so they’re easy to get. I have added and paid off multiple small to medium (10-60k) secured loans over the years and my score only fluctuates a little for a few weeks then goes back because my total credit with the dozen credit cards is so large.

      • PunnyName@lemmy.world
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        1 year ago

        I like video games, and the challenges they provide.

        The game you’re playing is stupid, and no one should have to install that shit.

        Good on you got doing it I guess, but it continues to persist, which is problematic.

        • XIIIesq@lemmy.world
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          1 year ago

          It’s not really a game, more of an exploit.

          But most people won’t need to do that any way, it’s overkill for like 99% of people.

          If you have a credit card that you use and pay off regularly, a couple of paid off car loans or something like that and no overdue bills on your history, you’ll be absolutely fine.

          • PunnyName@lemmy.world
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            1 year ago

            Eh.

            Exploits A) often benefit the player by letting them skip a lot of work with big rewards, and B) usually get fixed real fast.

            Now if doing this meant you never had to work a job in your life again and you could get actually make significant income, sure, I’d consider it an exploit.

            I can’t agree with you on this.

        • Dkarma@lemmy.world
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          1 year ago

          It’s not a game u fucking moron it is a measure of responsibility.

          Just admit you’re irresponsible and can’t hack the most simple math required to determine risk.

          Fucking assholes blaming the ruler cuz they can’t measure. Lmfao.

          • PunnyName@lemmy.world
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            1 year ago

            No, it’s a game.

            And thanks for making it personal. Even tho it was entirely unnecessary.

            Dick face.

      • ExceedinglyPanWoofer@yiffit.net
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        1 year ago

        Where would one look to find a high cash back card? I’ve been wanting to improve my score by switching to using a credit card for primary shopping that I pay off, but I can’t seem to find any good offers/deals/contracts/whatever term you’d use for a credit card. Probably my score though.

        • edric@lemm.ee
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          1 year ago

          Nerdwallet has a ranking of credit cards based on categories (travel, cash back, etc.). You can try checking it out.

        • LeafOnTheWind@lemmy.world
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          1 year ago

          For simple cashback without yearly fees, 2% on everything or 5% on some things is about as good as it gets. I do everything on chase for simplicity and I’ve been reasonably happy with them. Twice now they have detected someone trying to use my credit card number (not sure how they got it), stopped it, and alerted me instantly. I mostly use the freedom unlimited card which was one of the better cards when I got it a few years ago.

        • Dkarma@lemmy.world
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          1 year ago

          Discover and Amex pay most statistically but some.places don’t accept them for that reason

    • droans@lemmy.world
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      1 year ago

      That’s only on the VantageScore - the free score most places show. It isn’t actually used by more than a handful of institutions.

      FICO, the system used by the vast majority of lenders, considers closed accounts just the same as open.

    • spaghettiwestern@sh.itjust.works
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      1 year ago

      Not just paying a loan off early, even having the loan eventually drop off the credit report completely. This month the only change was an old, paid-off mortgage and line of credit dropped off my credit report. My credit score dropped substantially.

    • XIIIesq@lemmy.world
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      1 year ago

      I see where you’re coming from.

      Credit scores aren’t about how responsible you are, they’re about how well you can stick to an agreement.

      • Lols [they/them]@lemm.ee
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        1 year ago

        paying off the loan early is a part of any agreement, otherwise it wouldnt be an option

        credit scores are entirely and exclusively about how good of a debt slave you are

    • Dkarma@lemmy.world
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      1 year ago

      That’s not why it went down…lol.

      Tell me u don’t understand how credit works…