I always assumed credit scores were an integral and historic part of the American financial system.
They were not, they are very recent,most of your parents didn't have credit scores growing up, and as you can probably tell or at least intuit, it's mostly just a b******* scheme for those with capital to accrue more capital by invading your privacy.
It's not like they didn't look through your financial history before then - they just didn't have to show their working publicly, which meant you could ne discriminated against for any number of things
I tried to open a bank account at a credit union while homeless. Had $42k on my direct express card, finally on SSI, lump sum was for the previous year while unable to work.
No debts, never used a credit card. Couldn't open a bank account. Had to go thru a program that assigned me a fake credit card debt that I had to pay off for 6 months to get my credit score high enough.
Credit scores didn’t exist but credit bureaus date back to the mid 1800s in the USA. Also, as others have mentioned creditors would do their due diligence and try to assert that you would be able to pay back your loans by doing many of the same things they do now.
This really isn’t some new, crazy concept like you’re making it out to be. The score has only simplified the process.
Back in the seventies/early eighties, I remember my grandmother getting financial privilege by showing the check numbers in her checkbook, which were in the high thousands.
If you ran around bouncing checks, you would get cut off long before that and have to start over at the dreaded check number 101.
Remember when there wasn't a proprietary algortithm giving everyone a social credit score and instead you had to get a letter from an existing member to signify your trustworthiness?
I dont like the proprietary nature of credit algos, but I'm not a fan of the letter system either
The idea is fine, but when they’re run by the credit bureaus, they’re subject to extreme corruption. Even if run by the government, as they should be, they’d be subject to extreme corruption.
In Norway having loads of credit cards is negative for getting a house loan as it is potential debt that goes against your payment ability for the house loan.
Meaning we do have a credit score system for getting loans and more stuff on various credit solutions, but credit cards works against larger loans.
Which can be a pain in the ass when you want to buy a house/apartment and have credit cards that might deny you the last bit of money to win the bidding war...
I will just leave this here. Your employers can snitch on you as well and just give all of your paystubs to...Equifax. It was shocking to see which ones did and which ones did not.
FICO is kinda stupid in some ways but with responsibility it's not hard to get a decent rate/favorable score. Yes at the top end is dumb you need to open more credit but in practice that's not hard to do assuming you aren't just forced by circumstances to just live off credit.
It's a silly system but really not that hard to do well. Put everything on credit card and set everything to auto pay the statement. That alone will give you good enough credit with little effort.
So we invented social score just before the 90s, and everyone just shrugged and said okay. I guess that's cool. But we freaked out when china did the same thing a decade or two later, not realizing we've had it the whole time.