I can understand your points, but I think you're looking at some of these things the wrong way.
A bad credit score isn't designed to be "punishment" (nor is it as miserable as being sent to prison). So comparing years of bad credit to years a CEO spends in prison is like comparing apples with squid.
Credit scores are designed as a way to make credit affordable for everyone (well, technically they are designed to maximize profit for the banks, but less profit per customer means they need to figure out how to get more money out of each customer. So, same thing more or less.). Bad scores are what warn lenders, "Hey, this guy probably won't pay us back, so we need to charge him a ton more in interest (or decline him entirely) so it doesn't cost us a fortune later".
When people "burn" lenders, the lenders have to make the money back somehow... and if they can't get it back from the original borrower, they have to make all the other customers pay for it (with higher rates). So in that way, credit scoring serves as a protection for those borrowers who are considered "lower risk". If you take away a lender's ability to accurately decide who is high or low risk, then they have to just assume everyone is high risk - so, everyone pays high rates.
This is why AOC/Bernie's plan for a 15% APR ceiling on consumer lending would be horrible for the people it's designed to help (and actually, only horrible for those people, it wouldn't really affect people with good credit one way or the other.) A 15% rate cap doesn't mean that people who would get rates over 15% are going to get a lower rate now. In real life, it would just mean those people wouldn't get credit at all. Subprime car loans and credit cards, and even payday and other short-term loans would go the way of the dinosaur. Maybe in the long run that's a good thing, who knows... but right now it would be a really bad thing for the people who are counting on the availability of that lending.
It was decided by the Gov't and the banking industry that 7 years is a good length of time to decide someone's debt risk. Any more than that is unfair, any less is too little data. And if they make it too easy for people to PFD, then the data largely won't be accurate anymore, and again, everyone that's a low-risk who worked hard to earn good credit would have to suffer because of too many high-risk people getting good scores by gaming the system.
I agree that 7 years is a frustratingly long time to wait for your credit to improve, but realistically it shouldn't take anyone nearly that long. You can file BK and be back on your feet in months, or a couple years tops. Or you could settle-for-less, and the bad marks from now-paid creditors fade away after a few months or a couple years. There's really no reason anyone's credit needs to stay in subprime territory for 7 years, unless they were literally just not trying, at all.
My credit has some serious blemishes... 8 chargeoffs from less than a year ago. But I'm already well on the way to recovery, because I was proactive. If I just sat around and "waited" for my credit to fix itself, then yes it likely would've taken 7 years. There is always a solution for everyone to get back on the road to good credit - the particular solution varies from person to person, but there is always a better solution than "waiting for the problem to fix itself in 7 years."
If anyone needs help figuring out the best solution for their personal situation, these boards are a huge help, and any number of knowledgeable people here are happy to offer free advice.
Total Loan Balance: $43k / $65k
Total SL: $78kI definitely understand your frustration, I've been there many, many times myself. But this is the part that caught my attention - "sometimes it boils down to either making a credit card payment or buying food." I've been in exactly that same situation before, and it is no fun at all. But unfortunately, being in a position of needing to decide between eating or making a credit card payment makes someone a very high risk in the eyes of a lender, and yes it would be easier to pay off your creditors if the terms were better, and you wouldn't need to overdraft your checking account if you had more room on a credit card to use as a buffer... but unfortunately it's impossible to get good credit on good terms, because the lender is going to be afraid that someday that borrower will start picking food over paying their credit card bill. I know how horribly unfair that feels, but it's sadly the only way that a lending market can really work, otherwise the banks just end up taking too many risks for not enough reward, and run out of money to lend altogether.
It's similar to how, if the government mandates that car insurance companies give people a break on their car insurance rates because they're having money problems (but their insurance risk is exactly the same), then the only options are for the insurance company to run out of money, or to jack up everyone else's car insurance rates (inadvertently making a large group of people who used to be able to afford it, not able to afford it anymore). It makes things easier for the people who are having the hardest time, but meanwhile it's now too expensive for anyone else to bother with buying car insurance anymore.
As much as it might not feel like it right now, believe me, lenders WANT to loan as much money as they can to as many people as they can. It's why they have so many sign-up bonuses. It's why they're constantly trying to come up with newer, more accurate scoring models that group more people into the "low risk" category. They are in the business of lending, and they would LOVE to lend as much money as someone is willing to borrow, as long as they think they'll get paid back eventually. People with low scores and/or high balances tend to frequently not pay the money back. And as confident as we might feel that we'll pay it back, if the computer doesn't agree, then the bank won't lend. It used to be different back in the days where the guy who decided to lend to you or not was right on the other side of the desk at the bank, but those days are long gone. And honestly that's probably for the best, because algorithms keep lending costs down for everyone.
