Calculating Your Credit Scores

China’s social credit system has been met with much criticism in the West. But there are questions to consider in the UK.

Recently, Stockholm-based investment firm EQT Partners has been making moves to acquire a controlling stake in private credit bureau Schufa, a German equivalent to the American FICO.

Some have compared Schufa and FICO’s handling of user data to China’s social credit system, where citizens’ access to air travel and other amenities can be restricted if their scores are low enough to be put on a blacklist. The algorithms involved in both the creation of Schufa and in China’s system have been subject to scrutiny, with movements like OpenSchufa attempting to reverse-engineer the German company’s algorithms to figure out how citizens’ scores are tallied.

These attempts to calculate a person’s value or trustworthiness raise an important question: how are these algorithms determining these scores?

The History of Social Credit

Social credit as a concept has been talked about in government circles since at least 2007, with actual testing of the system beginning in 2015. The purpose is simple: take the evaluating procedures used by credit agencies like Schufa or FICO and extend them to all aspects of life. The system and its penalties for citizens on its blacklist have been in effect in mainland China since 2018 but as of yet have not been officially implemented in Macau or Hong Kong. While often described as Orwellian in Western media, the truth of the system is not so easy to define, with some scholars pointing to the language barrier and legal jargon of the actual policy making it more difficult for a Western audience to fully translate and understand.

China’s social credit system has been met with much criticism in the West. However, aspects of the social credit system have found their way into several countries. It’s just not always been done through the government. Social credit, in China, is focused on this idea of “public trust”, that whichever company or person being evaluated can be trusted by the public to act with integrity or within the bounds of the law. The same can be said of companies evaluated by the Better Business Bureau (BBB) in the US, though the BBB lacks any legal teeth to penalise companies.

In the UK, Boris Johnson recently announced a “loyalty points” system which would reward citizens for eating healthier in an effort to fight the UK’s struggle with obesity which lines up with the “redlist” China maintains of companies and individuals which have particularly high scores.

Even just the base credit scoring done by companies like Schufa, FICO or Callcredit can have serious impacts on individuals lives which can look a lot like how the West views China’s system. Some landlords in the US will ask potential tenants to submit to a credit check before renting them a room, meaning that even access to basic necessities like housing can be determined by these sorts of scores.

How Are These Scores Calculated?

The short answer is “we don’t really know”. For example, FICO offers a little chart explaining how they weight all the factors of your data, but the actual calculations and hard numbers that make up the final score are not shown. Similarly, Schufa does not really disclose the data it uses to calculate people’s scores, the algorithm behind the calculation, or anything besides the actual scores themselves. We know they get much of their information from banks, but that’s about it. When a woman took the company to court in 2014, asking to see how her negative Schufa score was calculated, they argued that the process was a trade secret. The court ruled in Schufa’s favour.

OpenSchufa has attempted to figure out how the process works, while calling for Schufa to release their algorithm to the public, and their results paint an interesting picture. Individuals with no negative characteristics could still have bad scores, out-of-date credit scores can still have an effect on their ability to apply for a loan, and certain factors like age and biological sex (not gender) could possibly have an impact on the score despite people having no adequate control over those things. With the algorithm itself still a mystery, these are the best indicators of how people’s scores are being tallied in Schufa.

Similar mysteries abound when trying to understand China’s social credit system. Its wider scope compared to traditional credit scoring means that individuals might be penalised at seemingly random times. For example, Chinese MMA fighter Xu Xiaodong was forced to travel 36 hours to a fight by slow train due to his credit score being lowered. This broad scope is a major piece of the criticism of the social credit system, as scores can seemingly be lowered at-will by the invisible hand of the agency controlling the scores. However, anyone who has ever applied for a loan, believing they had good credit, only to find that the bank denied their application has likely experienced a similar feeling.

In the UK, which is still operating under the General Data Privacy Regulation (GDPR) like the rest of the EU, a broader version of the already-existing credit system seems unlikely, outside of efforts like Johnson’s loyalty points system.

What Does the Future Hold?

In the short term, not much. Johnson’s loyalty points system is due to be implemented in January, and the EU has talked about banning the use of AI for calculating social credit outright. Most interestingly, however, administrative judges in Germany have asked the European Court of Justice to evaluate whether Schufa’s trade secret scoring algorithm is operating legally under GDPR. The effects of this judgement could have impacts on scoring companies in the UK and how they have been scoring individuals themselves. Regardless, 1984 isn’t quite as close as is often stated.

Zephin Livingston
Zephin Livingston
Zephin Livingston is a content writer for eWeek, eWeek UK, IT Business Edge, and SoftwarePundit with years of experience in multiple fields including cybersecurity, tech, cultural criticism, and media literacy. They're currently based out of Seattle.
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