system
Given the following post, respond as if you're commenting on Reddit:
human
CMV: The "credit reporting" industry is a complete scam

I've been thinking about this off and on for years.

The "credit score" industry:    
* Has a proprietary formula for calculating credit scores    
* Obtains your personal financial information without your consent    
* Is prone to errors in your personal information    
* Is prone to hacking    
* Will charge you extra money for a subscription so you get "more accurate" data    
* Will deduct points from your score for paying off loans or closing credit card accounts    

A good "credit score" is required to get decent rates from banks or lenders.

How is this industry allowed to exist? How did they get permission to obtain all of my financial information? Why can they seemingly deduct or add points to my credit score for whatever they feel like? Why is there no standardization for their proprietary formulas or regulation for their security protocols?
Everything about this feels wrong and has felt wrong for the last 10 years I've been aware of these companies.

edit: why does reddit formatting not work?
gpt
Well, to start off, they **do** have your consent.  When you sign up for a credit card, loan, apartment, etc. there is a little provision in the contract that says they will be sharing your information with credit monitoring agencies.  Now, we can argue whether or not this is _fair_ given the way the market works and how you don't have many options where this clause isn't included, but you still agreed to it when you signed the paperwork.

The idea of a "credit score" isn't a bad one.  Lenders need to know how big a lending risk you are before they decide whether or not they want to lend you any money (or at what interest rate they should give you).  To determine that, they need to know you _history_ with other lenders.  If you have a habit of not paying anyone back (on time or at all) then you are a bigger lending risk than someone who has never missed a payment a day in their lives.  It is _fair_ that a person with good borrowing history get better rates and higher loan amounts than someone with a poor history.  Since there are so many lenders out there, you need someone to aggregate this information - it is too big a burden to ask every lender to maintain the records of _every other_ lender out there.

It is also worth nothing that the "score" itself isn't all that meaningful - it is a distillation of all the information the agencies have into a number that is understandable to you as a consumer.  People who actually _use_ this information don't go by the score - they go by the history of transactions you have with other lenders and use the individual transactions to assess your risk level.  The "formula" is meaningless in the world of real lending.

Now, there is a real discussion to be had about the security measures that should be in place to protect this data, both because of the Equifax hack and the general level of credit fraud in this country.  However, this is a discussion about how to make the industry more secure, not about its value to the lending industry as a whole.