According to a survey just released by the Office of the Comptroller of the Currency, some credit card issuers have eased their standards for the first time since 2008 on granting credit card approvals. They have reduced the FICO score needed to qualify as part of their underwriting requirements, and they are also raising the upper limit on the size of the line of credit offered.
Primarily, the changes are due to the fact that late payment and delinquency rates have declined, so banks and credit card issuers want to attract more consumers to start using credit cards once again.
Enticing Credit Card Users
One lesson that consumers learned from the recession is the need to decrease their amount of debt. For many consumers, this equated to reducing the use of their credit cards. Now, credit card companies are trying to make it easier for consumers to get approval for credit cards.
According to the study, entitled the Survey of Credit Underwriting Practices, “For the first time since the 2008 survey, 25% of banks offering credit cards have eased their underwriting standards, primarily in response to changes in economic outlook, the competitive environment, market strategy and regulatory policy. The principal methods of easing credit card underwriting standards were reducing credit score cutoffs and increasing maximum line size.”
Not all Rosy
While some banks and credit card issuers are lowering their standards, others are staying the course while a good many are actually tightening standards for approval. Of the 16 banks that participated in the survey, 31% say their qualification standards have not changed. Another 44% of the banks say they have actually increased their standards, making it harder to get approval than it was in prior years. The good news is that number is down from 81% last year.