Yeah. Good riddance. The credit system as it exists today is abusive. I fought a medical group fraudulently double billing me and took it to my attorney general and TransUnion. You can imagine my anger when my credit monitoring told me that I have a mark against my credit.
This stuff with medical organizations should be criminal, but for whatever reason, they get a pass harassing citizens. Put a bill to this absolute nonsense, and I'll immediately vote to punitive damages for these corporations taking advantage of people.
The bigger problem is that this is a cure for a symptom of a dysfunctional medical billing lifecycle that in its current incarnation should be outlawed.
But your scenario has nothing to do with medical debt. Yes, the issue is with the credit bureaus - who are there to make money off you. In fact, lots of companies do that. If you google your name, a bunch of sites might show up reporting you have a criminal and civil record. You can create an account with them, check your record, and remove the bs they put in there. You can buy someone else's half-fake record.
All of this is defamation, and is a tort. There's nothing you can do except waste ridiculous amounts of time playing the never-ending cleanup wars, or have your expensive attorney do that for you. The problem is how easy it is to get fake data into a report on You, that a company sells. They have zero interest in it being accurate, as the worst that happens to them, is they remove the fake data after spending about 5 minutes on it. After you spend either hours/days or thousands of dollars.
I lived in a high-rise that gave free directTV. Never used it. Moved out. A bill for almost a year of some football package showed up on my credit report. Apparently they sent an opt-out letter for this expensive addon to their free service, and billed anyone who didn't reply. When I showed directTV that the billing period was for two months after I'd moved out, they did zero. I asked for verification of debt - the standard "reddit knowitall teen" suggestion. Absolutely nothing happened. I filed an FTC complaint - Nothing.
For some reason, when I opened a case with the original yelp-type scammers, the BBB, I got a call from a manager and the debt was finally removed.
What needs to happen is a barrier to getting negative data into a report someone provides on you. If that report contains defamation, and if you prove it to a non-currently-existent agency that oversees the credit bureaus, they have to pay you for defamation, w/o you suing them. Tens of thousands per false record, per person.
The reason this happens is not medical organizations. There are always bad actors, and always will be. No one trusts the bad actors - they trust the TransUnion (they/them) report. TransUnion is in the business of taking garbage, and putting a trust stamp on it. Similar to what lead to the securities market getting railed.
I’m not American, I never understood the credit system so I may have misunderstood it. I’ve always been a little afraid to ask, but isn’t it sort of weird that it is legal to score your citizens like that in a democracy?
I can understand the need for a registry of people who cheat or simply don’t pay back, but even that is sort of an “evil” area to me since it can trap people. But an actual credit score? That seems very dystopian.
And how do you score it? I’m a poor bank customer, I’ve almost never taken any loans, and when I did I either paid them back more quickly than the bank would’ve liked, or it was for tax benefits like with my 60% mortgage. I have savings and investments, but I manage them myself meaning that I generate no real fees of note for the institutions that house them. So technically I’m sort of a terrible customer for a bank, but I imagine my credit score would be quite high?
/Edit
Thanks for the responses. I'd like to point out that we do get scored in Denmark where I live, but it's happening when you apply for things.
When my wife and I bought our house, we submitted a range of financial records, and we also granted the bank temporary access to obtain financial information about us from places like the national tax agency and the registry of "poor lenders". Which is I guess is similar to a "credit score", but to me it's different because it is generated and accessed at a specific time, and then gone.
Maybe that's actually how the credit score works, but seeing those apps where you can see your "number" felt dystopian to me.
I know from experience that both Norway and Sweden have credit score systems. It’s an expedient way to formalize a single important aspect of reputation, so that people who are careful to service their debts can borrow on favorable terms.
It’s the least painful way of enforcing some personal responsibility for debts taken for personal benefit, and because medical treatment is socialized and the government looks after the poor, nobody should ever be faced with the need to borrow to continue living.
Credit scores in the US are much more sinister, in that respect, representing a measure of not only fastidiousness but also desperation.
I'm not sure what a better system than credit scores would be. How else should a bank determine if you are likely to repay a loan?
To answer your other question about how it's determined, it does not measure how much banks make off you. It measures how well you pay off debts. So taking out debts (or using a lien of credit) and paying it back shows that. As does making regular mortgage payments. You can have good credit in the US while paying no extra money to any banks, with interest free car financing and no-fee credit cards you can pay off in full.
>How else should a bank determine if you are likely to repay a loan?
Not this way, or not at all for all anyone else should care. Banks are paid interest for taking a risk, so let them take the risk. No other country on Earth has credit scores like the US, and they don't want them because credit scores are disgusting, inhumane.
> Not this way, or not at all for all anyone else should care
Well, clearly they have to have some way to tell. Or would I be able to borrow hundreds of billions to buy TSLA because I think it's undervalued in your example.
Clearly, banks assess how much to loan at what interest rate, and those numbers are different for different people. How else do you think they should make their decisions?
The UK has credit reports, which is a document containing all of your lending history (and previous addresses, current accounts, etc.). Credit scores are commonly thought of as an add-on by consumer credit reference agencies to try and sell people a monthly subscription: they are generally regarded as useless.
They're basically just presenting the same information in a different way. Lenders will still do a hard pull on the credit report as they do in the US.
But people have varying levels of risk and the credit score is how they categorize that risk. If you force banks to not look at past history (all a credit score is), sure, they will accept that risk but be prepared to pay 30% interest on a car loan.
There are plenty of creditors today who have no or poor credit, and they can still get loans (especially for cars) it’s just at absurd interest rates. Eliminating credit scores will just put everyone in the same (very high) bracket.
If you want to actually fix the system, substantially raise the barrier to non-revolving accounts reporting debts and make a reasonable process to dispute that debt.
Credit agencies should be more mediators than data-sellers.
"but isn’t it sort of weird that it is legal to score your citizens like that in a democracy?"
No, why? How else do you ascertain risk?
A democracy =/= banking and financial products. Sure there is a central bank, but that is not related to this conversation.
The credit agencies are not government facilities.
Credit agencies are regulated by the government.
Without getting into any real details about US credit scores, how would you determine risk on say giving someone a car loan? You’d want to know that the person has 5 previous repossessions right? A credit score tells you that. Without some type of score (in the abstract sense), you’d have no way of determining risk.
In my country it's fairly easy; you can not default on debts, they are for life.
If you don't pay, debt goes to a specific government ministry that picks you clean (property, assets, accounts) until debt is paid off, leaving you with nothing more than enough to eat and pay rent every month (for a tiny apt).
Every time you try to take a loan or buy something on a payment plan, the seller will check with the ministry if you are registered there. You can't get anything unless paid upfront in full, no cellphone subscription, no credit cards.
Once debts are paid off, you are still in the registry for 3 years (unless you rack up more debts).
The fact that banks would like this to better determine risk, doesn’t mean a society has to allow for it. Banks could also just accept the higher risk, and work with that. For example by asking higher interest or insuring the debt. There are solutions that don’t require big invasion of privacy.
This is all true. I don’t think I’d like paying more for debt because others routinely default on theirs. I’ve always been judicious with the debt I take on, and that has benefited me by allowing me to access the cheapest credit and no-deposit utilities.
All that being said, I do appreciate that centralized scoring can go too far. And I don’t have the answer for where a line should be drawn. Or how far back in time the scoring should assess. (BTW, it’s generally 7-10 years I believe, which is pretty short)
How is auto insurance handled where you are? How would you feel about no-fault insurance rates where every driver pays the same amount regardless of risk?
Asking who to pay higher interest? Everyone? Until one bank says “you can pay less if you tell us about your past loan history”. Which 99% of people who pay their loans back are going to take.
I think the thing that most of us can't wrap their head around is the "building a credit score" part, not the credit score itself.
As in, if I never take a credit and save all my money, I don't have a good credit score, but if I spend 95% of my net income on weird stuff, but do pay my credit card bills on time I suddenly have a good credit score? As exemplified by advice I often read to route as many recurring payments as possible (including rent) through a credit card (and paying on time, ofc).
I mean, that's how it was explained to me, but happy to be proven wrong.
A large part of a credit score is determined by a track record of on time payments. You don't need to spend 95% of your net income on weird stuff to do that.
Are you sincerely confused that building a credit score requires you to actually use credit?
This is pretty inaccurate in my experience. I have always had a score above 800 and never took on heavy debt and paid of credit cards monthly.
I suspect most of the building credit Behavior comes into play when you are trying to dilute derogatory marks on your credit reputation. If you missed a $50 bill, it is better if it is one of hundreds of transactions then one of 10.
With that said, I can see the value of showing some experience of servicing debt. Imagine being a banker talking to someone asking for a large loan. Someone with a documented history of paying on time is naturally lower risk then someone with no history
You’re basically correct (although 95% of income is drastically overstated, it can be far less than that), but I don’t understand why you can’t wrap your head around that? If you’re never taking on any credit debt then of course you will have a non existent credit score. If I’m a lender, how would I possibly know you’re capable of paying back a loan without some audit trail of your past ability to do so? It seems an incredibly simple concept to understand.
A side effect of the credit system in the United States is that it "entrenches and reinforces inequality by dictating a consumer's access to future opportunities."[0] This primarily affects minorities, though anyone in poverty suffers from the credit rating system.
In regards to scoring, its complex, but generally: pay your debts on time and on schedule. Importantly, do not pay off loans early. You'll get positive points for eliminating debt, even early, but more positive points for paying the maximum interest the bank would like to earn from the money they loan you.
There's certainly some uses of credit score that don't seem right (such as when it's used to price insurance). But I don't see what that has to do with democracy?
At its core, credit reporting agencies are collecting a registry of information about your credit accounts. How long have they been open, what's the total amount of credit available and the current balance. This is then used to determine if a lender wishes to offer you more credit, and if so, at what rates. A credit score is an algorithm to generate a numeric value from all those records (or the result of such algorithm). It's a labor saving step that also allow a lender to be more consistent in underwriting decisions. Typically, a credit card will check credit scores and ask about income, and similar for a car loan; a mortgage will be more likely to read the whole report and ask for paystubs to validate income, as well as require a release for tax records (but usually not actually request them). Without credit reporting, you would probably need to get letters from previous lenders attesting to your timely payments, etc; but it would be easy to leave out the lenders you didn't pay. Credit reporting gives lenders who don't get paid a stick to influence their borrowers that's easier to administer than taking them to court (which would generate court records, which are generally public in democracies).
Generally to score well, you want to have several active credit accounts in good standing (no reported late or missed payments), utilization on revolving accounts (credit cards) at 30% or less in aggregate, and probably 85% on individual cards, but not having significant balances at more than two or three cards, at least one account having been open for many years, not any or at least not many accounts opened in the last year, and it's helpful to have a current or recent installment loan (like a car loan or mortgage). Hard to say where you would fit on the scoring, depends on if your mortgage is still current, and what you do with credit cards.
> So technically I’m sort of a terrible customer for a bank, but I imagine my credit score would be quite high?
Correct. It's not a profitability score, it's a risk score. The only thing it tracks is how likely they think you are to pay back the loan.
They like to see activity though, they want to see you borrow money and pay it back. If you never borrow money your score can be lower since they don't have data on it.
> But an actual credit score? That seems very dystopian.
At the end of the day your lender is going to evaluate you. In the US they standardized it instead of letting it be subjective. Does that really seem dystopian?
Here is my recent experience that is not my fault. I received a bill from two ago. The provider decided to report me to a collection because they filed an incorrect claim. This was a nurse assistant portion of the urgent care bill. Everything else was covered but this bill was not filed correctly. The insurance won't cover because it is old bill but I am still on the hook. I wasn't even aware of this bill existed till I received a call. The bill is 3x times higher than what insurance would pay. I am totally under the billing gun and I am forced to pay otherwise they will ruiny credit.
If the bill is so late insurance won't pay, you are also not required to pay.
Threaten to report them to your state if they don't cancel the bill.
Next get your credit report and file a dispute that that part of it is inaccurate. The vast majority of the time it just gets removed because the biller can not be bothered to submit the needed documentation.
If they sent it to collections that's even better - just call the collection company and tell them it's wrong, and give them a long complex full explanation of why. They will drop the bill immediately - it's not worth their time to fight you.
> I am totally under the billing gun and I am forced to pay otherwise they will ruiny credit.
That's not how it works. You should have disputed the debt. If it was a billing mistake then you technically don't owe the money, and the charge should have been disputed. Get yourself an attorney, their fee to make the negative reports go away could be less than the bill.
All an attorney is going to do is write letters disputing the debt to the three agencies. The reporting collectors have a window of time to prove it. Otherwise it gets taken off your report.
Sometimes the debt moves across so many middlemen that the holder never even receives the request and the debt gets erased.
As an American (though not the OP), I think it's fair to start with the interpretation that any American medical bill is an admin mistake until proven otherwise. Until each line item has gone through a few rounds of verification, it's very likely that it contains at least one error.
I always check the bill, in the particular the medical coding - I've very very very rarely seen one that was coded correctly.
When I complain they offer me a "courtesy credit". Or I don't complain and just don't pay since if they can't be bothered to bill me correctly, I can't be bothered to pay.
So yah, admin mistakes. Deliberate ones.
Insurance just pays, they don't check the coding as carefully (how could they, they were not at the appointment).
An extremely common "mistake" (up-coding) is increasing the length of the Dr. visit up a level or two. Take a watch with you, and check how long the Dr. was actually present with you, then check the coding. (And paperwork and nurse time is built in, so it's not necessary to account for that when checking.)
They'll also bill for services they talked about, but didn't actually do.
And they'll code separately for a service that's supposed to be bundled with another code.
Because as a well-compensated engineer with good insurance, who pays his bills when possible at point of "sale"/leaving the office, some how in the last 20 years I've had several occasions where mystery charges came in the form of paper bills that I had to make several calls to get to the bottom of, sometimes 3-4 different amounts on different bills.
The US health care system is crazy in many ways, but hospital/doctor office billing and admin is one of the more egregious. I firmly believe they make money by people simply paying every statement they get, some of which the insurance company will later take care of anyway, just out of fear of these "collections"
I’ve been getting semi weekly letters from an anesthesiology company (because of course they would bill separately) due to time I spent on hospital last year.
Except my insurance paid and said I owe nothing. Then I received a bill a year after the fact, and I contacted mY insurance who again said I owed nothing, said they talked to the company and the company said they would correct the mistake. Then a week later the bill came again, and I repeated this again.
I’ve now done this weekly for the last two months waiting for them to try to harm my credit rating.
Billing is incredibly complex, especially when insurance is involved. There only 68,000 ICD-10 codes, which will be what almost every care provider uses in billing. Providers notes supplement these (sometimes), but those aren’t always complete or accurate, and because every encounter has some unique elements it defies rigid finite classification.
Something tells me that increasing the credit score and encouraging more debt financing of people struggling to pay a $500 medical bill may have some unintended consequences.
There is no law requiring the extending of credit to people whose income streams don't support it nor incentive for folks to take such loans on while credit scores can be used to deny folks housing, loans for cars that are increasingly unaffordable to buy outright even used, and jobs or charge them much more for homes/cars over the life of the loan.
I'm going to go out on a limb and suggest the downside is trivially avoidable by either side and the upsides could be substantial for many folks.
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This stuff with medical organizations should be criminal, but for whatever reason, they get a pass harassing citizens. Put a bill to this absolute nonsense, and I'll immediately vote to punitive damages for these corporations taking advantage of people.
The bigger problem is that this is a cure for a symptom of a dysfunctional medical billing lifecycle that in its current incarnation should be outlawed.