March 26th, 2008

National Credit Reporting

dcseain mentioned to me that in Germany, national credit reporting is illegal. A fast googling didn't turn up much except that Germany and some other European countries have very strict privacy laws because the Nazis used government records to track down Jews and other people targetted for genocide. (I suspect you could put together an interesting book about the aftereffects of the third reich.)

In Germany, credit gets extended much more by feel and by knowing people, I think. This has some obvious problems (what if you don't have social connections? or social skills that look good in an interview with a banker?), but the US system of national credit bureaus is so hopelessly sloppy that it isn't obviously better and may well be a great deal worse.

I'm not sure that there's a financially effective way of running a meticulous national credit bureau. I've speculated about religious people who take the ninth commandment (against bearing false witness) seriously running such a bureau as a non-profit, but I'm not sure it's legally or economically feasible and anyway, no one's lining up for the job.

Considering how much noise there is in national credit reports, it's surprising that they're taken so seriously, but (sorry no cite) there's evidence that people get very attached to the only fact they've got about a subject.

Addendum:: the tendency to be over-attached to insufficient information is called anchoring.