this post was submitted on 21 Jun 2025
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The minutia of the algorithm is private, to prevent gaming it, but the major factors are very well known, and make perfect sense.
Also if you repay your loan early is somehow bad for your credit score.
If you change your bank to go to a cheaper one alters your score (creating sticky monopolies).
To scam citizens out of yields while minimising the chance of nonperforming loans?
The rest of the world puts citizens first.
The banks are the professionals with all the data & capital. They get to multiplicate money (give loans without backing) and get to charge relatively big interests on those loans (interes rates (spreads over risk-free) tnot indicative of/to cover the expenses of defaults, which are very rare overall, or their own operating costs).
The money multiplication thing comes from the state (central bank), and it exists to allow people to live & to perpetually stimulate the economy (eg getting a house earlier than saving up the lump sum to buy it whole). The banks job is to balance things out & offer competitive loans in terms of profits vs probability of defaults. Without that it's just free money for the banks. Like insurance business only selling policies to people/entities that won't ever need them.