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Computers aren't just doing hard math problems and showing us cat videos. Increasingly, they judge our character. Maybe we should be grateful.
A company in Palo Alto, Calif., called Upstart has over the last 15 months lent $135 million to people with mostly negligible credit ratings. Typically, they are recent graduates without mortgages, car payments or credit card settlements.
Those are among the things that normally earn a good or bad credit score, but these people haven't been in the working world that long. So Upstart looks at their SAT scores, what colleges they attended, their majors and their grade-point averages. As much as job prospects, the company is assessing personality.
The idea, validated by data, is that people who did things like double-checking the homework or studying extra in case there was a pop quiz are thorough and likely to honor their debts.
http://bits.blogs.nytimes.com/2015/07/26/using-algorithms-to-determine-character/
[Other Companies Involved With Similar Programs]: ZestFinance , Workday
(Score: 2) by Francis on Monday July 27 2015, @07:16PM
By that logic anything other than paying by cash would result in debt. It wasn't that long ago that a check might take a week to clear the bank, during which time you would have been "in debt" by that reasoning.
It's not real debt anyways, I don't pay any interest on it and at all points the money is there to pay. The CC issuer gets a transaction fee from the merchant, the merchant gets their money quite quickly as well.The point that you're ignoring to argue semantics here is that I'm not paying any interests or fees and I don't even need to pay money that I wouldn't already be spending to get the score.
Because I built my credit score up, now I can borrow money interest free for months at a time without incurring any interest fees. That is debt, but it's not exactly what people are talking about, it's the free use of other people's money. But with interest rates as low as they are, it doesn't necessarily make any sense to bother with that.
(Score: 0) by Anonymous Coward on Monday July 27 2015, @07:33PM
By that logic anything other than paying by cash would result in debt.
Pretty much. That logic is absolutely correct, interest or no interest.
(Score: 4, Informative) by Snow on Monday July 27 2015, @08:09PM
Well, cash is debt too - it's just government debt, not personal debt.
(Score: 4, Touché) by Zinho on Monday July 27 2015, @07:53PM
By that logic anything other than paying by cash would result in debt. It wasn't that long ago that a check might take a week to clear the bank, during which time you would have been "in debt" by that reasoning.
It's not real debt anyways, I don't pay any interest on it and at all points the money is there to pay.
Oh, but it is real debt. The reason that it's a "credit" card is that the issuer "credits" you money (this is the loan) when you swipe the card at point of sale. The money being spent isn't yours, it's the card issuer's. It's a loan, and results in you being in debt, even if you pay it off before the monthly deadline. You may not feel like you're being charged a fee for the transaction, but the fee is figured into the price of the goods you buy; there's no such thing as a free lunch.
From a financial perspective, this is a fundamentally different transaction from a check or a debit transaction. Even when your check is kiting its way from store to bank, the only money involved is yours.
[rant mode = on]The consumer protection laws covering credit card transactions became necessary because otherwise the card issuers would have no incentive to deal with card theft/fraud. As long as the card issuers get paid their transaction fees and can put someone on the hook for repayment of the loan they're happy. By making it the card issuer's problem when a card is stolen the government leveraged the bankers' resources to quickly detect and roll back fraudulent charges.
I'm confused about why my debit card doesn't get the same protections, which is a position I hope you'd agree with. It looks like a credit card, it gets processed like a credit card (signature instead of pin), we should give it the same legal protections as well. Unfortunately, since it is essentially a plastic form of writing a check, it gets no such love from the legislature.[\rant]
"Space Exploration is not endless circles in low earth orbit." -Buzz Aldrin
(Score: 2) by Francis on Monday July 27 2015, @09:03PM
If you don't mind watering the term debt down to the point where it's completely meaningless, that's just fine. But, every transaction that takes place would involve debt at some stage and I don't think that's a particularly useful way of viewing the situation.
What's more, whether you consider it to be debt or not, it's not even remotely related to what the person I was originally replying to was talking about.
(Score: 1, Informative) by Anonymous Coward on Monday July 27 2015, @09:25PM
Do you know any accounting, the profession whose sole job is to keep track of these things? When you use a credit card, your account's liabilities are credited, that is increases. Liabilities are debts that need to be paid. When you pay off your liability, your account's liabilities is decreased by a debit.
You say other people are playing semantic games. That is just not true, you are just refusing to accept the standard practice for all accountants everywhere in the world. This is freshman highschool material. And it certainly is related to the original point: you must go into debt to increase your credit rating which only serves the purpose of determining how much debt other people are willing to give you.
(Score: 2) by VLM on Monday July 27 2015, @09:31PM
every transaction that takes place would involve debt at some stage
That is correct ALL do with the exception of weirdo stuff like escrow account transactions, for which you usually get to pay a fee.
Go ahead... try to explain non-garage sale level transaction that doesn't at some point involve showing up on someone's accounts receivable or accounts payable report at some level of the game, even if its a rather short period of time.
You could redefine the word debt to be "only house mortgages" but its going to confuse everyone else.
(Score: 0) by Anonymous Coward on Tuesday July 28 2015, @02:49AM
There's no watering down, that's exactly what it means. Using a credit card is taking out a short-term loan, which you agree to pay off under a certain interest rate. Even if you pay it off right away, the entire point of credit cards, the sole reason they exist is for short-term loans - taking on debt. No ifs, ands, or buts about it. Saying that using a credit card isn't debt is playing semantic games and watering down terms.
(Score: 2) by vux984 on Monday July 27 2015, @09:37PM
By that logic anything other than paying by cash would result in debt.
No, not really.
Paying by bank card debit / visa debit the funds are directly withdrawn from your bank account cash balance; or pre-paid debit card balance. Its all real time, you don't leave the store until the merchant has their cash in the bank. So there is no debt.
Paying by cheque is a bit messier. It -is- debt, but strictly speaking its private debt to the person you wrote the cheque to not the bank or other financial company. So they don't consider it debt. (No more than they consider a loan from your parents to be debt.) It's not debt between you and your bank because the bank has no liability -- even if you write a bad cheque; when they receive the cheque to clear it they simply deduct the funds from your account if they are there or bounce it if they are not. (Unless you have overdraft protection -- but that is separate and -is- credit.)
If the recipient of a cheque you write clears it at another bank, and their bank extends them the funds in advance of the cheque clearing that is also credit, but its between the cheque receiver and their bank, and is separate from the cheque writer. In practice, being the recipient of bad cheques and not having the funds to repay them when they bounce results debt for the recipient to their bank; and probably also results in a hold being placed on your deposits to ensure they clear to prevent this debt from happening in the future. So the ability to withdraw cash from a deposited cheque before it clears is a form of credit; and its a 'priviledge' they only extend to people with good credit. (But again it all has nothing to do with the cheque writer.)