Credit rating system and meaningful choice


A story from NYT Real Estate section about a British expat’s search for an apartment in Manhattan reads on different levels. Describing the interaction with a real estate agent:

“Almost by way of small talk, she said ‘Where are you from’  and I said ‘I’ve just come over from London yesterday,’ … She asked whether he had a credit history in the Unites States or a bank account or a Social security number, all of which he would need to rent an apartment. No, no, no. … But his employer would provide initial financing and act as guarantor.”

What would be the expected response from the realtor? In this case walking out on the client:

“She completely lost interest and just left,” leaving him standing on the pavement.

Welcome to the Big Apple. It would be easy to dismiss this as yet another rude-awakening in the ways of Manhattan for a new arrival– an experience this blogger can relate to. But there is a more subtle point about the pernicious growth of credit rating systems here. It’s not an oversimplification to say that without a social security number, a US consumer is just a nebulous and largely invisible presence in the eyes of lenders.  Most of the data compiled by data-brokers such as Acxiom, Choicepoint and the more familiar credit-reporting bureaus such as Experian and TransUnion are indexed by the SSN. To oversimplify in database terms one could say SSN is the primary key to the database. In this case the expression “key” is quite appropriate because it unlocks all the reputation information required for a significant transaction: buying a car, leasing an apartment, even getting a cell-phone contract. With the credit history available, consumers stop being blanks faces, they acquire useful numbers: Alice has 700 FICO score, Bob has an 8-year mortgage in good standing etc. Everyone is now a three-dimensional character jumping out of the page, shrouded in precise numbers.

One of the arguments in defense of massive data collection is that it enables credit: individuals can go anywhere around the country and still enjoy the same access to credit as if they lived in a small-town where everyone knew first-hand about their impeccable track record in paying back debts. (The flip-side, never mentioned in the same sentence, is that nobody can start over: the scarlet letter of bankruptcy or foreclosure also follows people around. It is true that in this case there are no second acts in American life.)  The more wide-spread and inflexible our reliance on credit history, the more difficult it is to get started and the greater discrimination between those who have an extensive dossier verses those with a blank slate. NYC may be an extreme example. In keeping with its completely ludicrous and preposterous state of affairs, some landlords demand to see bank statements,  employment verification on official company letterhead and even past tax returns before approving a lease. But stories like the one above are far from unique: if the agent had any shred of common sense, she would have realized that a decent sized company–implied by having offices in London and New York– as a guarantor is much better than one would expect to get from most consumers: while individuals can go bankrupt or disappear, a company with deep pockets can be litigated to the last penny. The story did have a happy ending because at least one rental agency was sane enough to accept his application with six month deposit– but only after running a credit check on this person’s manager. There is no escaping the system.

cemp

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