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Douglas_Knight comments on Open Thread: June 2010 - Less Wrong
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For what it's worth, the credit score system makes a lot more sense when you realize it's not about evaluating "this person's ability to repay debt", but rather "expected profit for lending this person money at interest".
Someone who avoids carrying debt (e.g., paying interest) is not a good revenue source any more than someone who fails to pay entirely. The ideal lendee is someone who reliably and consistently makes payment with a maximal interest/principal ratio.
This is another one of those Hanson-esque "X is not about X-ing" things.
Expected profit explains much behavior of credit card companies, but I don't think it helps at all with the behavior of the credit score system or mortgage lenders (Silas's example!). Nancy's answer looks much better to me (except her use of the word "also").