[russellendicott]

This is basically how things used to work. The drawback is that young people with no credit can't build credit easily. You'd be disproportionately favoring those familial lineages with assets and losing out on a huge potential customer pool.

With better centralized data it's possible to having something of a win-win where banks get more customers and people can bootstrap their own lending reputation without having the last name "Jones".

Of course there's the tradeoff that you have to trust an institution to be a good steward of that data...

[bee_rider]

What would be the negative effects of that drawback? Higher wealth inequality? Increasing age for first time home buyers?

The ability to build credit isn’t actually an advantage in and of itself. In most other lines of business, if the business tried to point to “we’ve given you more opportunities to prove yourself a worthy customer” as a perk we’d laugh at them.

[bombcar]

The argument is that advantaged groups (privileged communities) get to build their life on credit and quickly become doctors and lawyers and such, and that denying loans to people who haven't proven the ability to repay (or who do not have people to co-sign) prevents them from getting a leg up on the pile. There's something to it.

But what we have seen is that the banks and companies prey on the disadvantaged people pretty effectively; note the absolute magnitude of student loans given to poor students for degrees that don't show a practical repayment opportunity.

And there's also the argument that easy access to very-low interest rate credit precisely is what is causing house prices to be so astronomically high - if credit isn't as available.

The overall practical result would be an increase in the cost of credit and a slowing of the economy. Disadvantaged groups could be assisted in other ways, however; the way we try to do it is not necessarily the only possible way.