China's New Social Credit Score

Nearly one-third of the population in the U.S. has a credit score below 600, and many of those people are working on credit repair. Credit scores in the U.S. are based solely on a person’s ability to pay their debts, how much debt they carry, and how timely those debts are repaid. But imagine a world in which you’re judged not only by those standards, but based on your spending habits, level of education, and even the credit scores of your friends and family.

That’s what it’s like to try to cultivate a good credit score in China. The controversial new system, called the social credit score (SCS), was introduced by the Chinese government in 2014 with a goal of full implementation by 2020. While the goal of the scoring system seems to be similar to that of the American scoring system, there are many, many differences, and some of them are downright chilling.


We previously noted the difference between trying to apply for credit in the U.S. fifty years ago as opposed to today. In the 1950s, the idea of a “credit score” began to take flight. The founders of Fair, Isaac and Co. (FICO) recognized a need for a more data-based rating system to determine the trustworthiness of a credit applicant. Prior to this, you could have been turned down for a loan based on your race, mannerisms, or even lack of cleanliness. Once the system was implemented, however, more people found it possible to gain access to credit, and it has constantly evolved to become what it is today.

In contrast, China has only recently begun the process of implementing a credit rating system. Brought about by necessity and fueled by smartphone usage, the Social Credit Score has been a subject of world-wide discussion due to its perceived unfairness. Not only does the SCS judge a person based on their financial decisions and standing, but on things that suggest they’re being rated on their value as a person.

While this system does seem unfair and is being watched by multiple human’s rights groups, it’s indicative of the differences between an individualistic society — in which it’s socially acceptable for the needs of an individual to take precedence (such as the U.S.) — and a collectivist society. Like many other Asian nations, Chinese culture dictates that the greater good is more important than the needs of an individual.

Credit bureaus

We’re familiar in the U.S. with the major credit bureaus: Experian, Equifax, and Transunion. They collect data reported to them by lenders, banks, and sometimes doctors or hospitals. This information tells them about your ability or inability to repay a debt. After seven years, most negative credit items will “fall off” your credit report.

Credit reporting is much more arbitrary and varied in China. To begin with, there are multiple credit reporting agencies in China with more popping up every day. Imagine if there were 20 different FICO scores to keep track of. Their ranges all vary, and they all judge a person’s creditworthiness based on different things. Some of them take into account your education and give higher scores to those who hold more advanced degrees. Some of them utilize your spending habits and even the credit scores or spending habits of your friends. Ultimately, this system will place a high priority (whether intentional or not) on punishing those who do not add monetary value to society.


Before our official credit rating system came into effect in the U.S., it was more difficult to prove that one was capable of handling a loan. (Not to mention that loans weren’t as necessary as they are today.) If you applied for a loan in the 50s, you’d likely be vetted through a series of phone calls placed to water and power providers, friends and family, and others who could vouch for your level of responsibility.

While this system does seem a bit more friendly and centered on relationships, it wasn’t a beneficial system for those who had poor reputations in small towns, minorities, and women, just to name a few. Today, our system focuses much more on factual data, which tends to put more Americans on an even playing field, though it can still be difficult for those who reside in very poor areas of the country who suffer from something known as “credit invisibility,” in which a person remains in a perpetual “catch-22”, unable to get credit because they lack credit.

In China, the goal of the new SCS is to encourage everyone to be the best citizen they can be by working hard to improve not only their credit, but their social standing as well.


Even though the SCS encourages people to improve their credit through spending habits and sometimes even cleanliness, it sometimes unfairly punishes those who are innocent. From our perspective, there are many things about the SCS that seem wildly unfair. For example, on some credit rating scales in China, parents with low scores may have a difficult time enrolling their children in school. Or, in the case of one Chinese man, some may be unable to purchase a plane ticket if they happen to default on payment. If someone is listed by the government as “untrustworthy,” they may find it difficult to go about their day-to-day life. They’d also end up paying more than those with high credit scores.

From a distance, it will be interesting to watch how the new SCS in China plays out as time goes on. It’s easy to speculate how it could be incredibly detrimental to many Chinese citizens as their income disparity continues to become more pronounced. Luckily, for those in the U.S. with poor credit who are in need of credit repair services, there is a path to financial success. For more information, please visit www.creditrepair.com.

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