Card companies and banks have decided to issue the new credit card offers, after a 3-year slowdown, to all those Americans whose credit scores took a beating due to the financial crisis in recent times.This would also include extending credit lines to those individuals who might have experienced foreclosures, charge offs, unemployment as well as other economic difficulties in the recent years.
As per the news reports in the New York Times, these new line of credit cards will carry heavy interest as well as high annual fees.Hence consumers will have to make comparisons with other credit card offers and check interest rates to save money and to repair their debt.
In the present scenario, lenders are willing to extend the credit lines without looking at the credit scores of the customers which has been the practice until now.In order to assess the risk, companies are closely looking at the behavioral patterns and other details with regard to employment etc.However, despite this relaxation in rules card issuers are not blindly approving customers.Instead they are trying to use new markers to classify individuals who have similar credit rating or credit scores.This would typically include those who fall under the “strategic defaulters” category and these are people whose credit scores would have taken a beating due to some bad fiscal decisions.They might have opted for foreclosure for some personal reason and may not be considered as potentially risky consumers.
The other type is the “first-time defaulter” who could have had a sound credit history but would have defaulted due to some unforeseen circumstances such as a recent unemployment etc.Here the missed payment could have due to genuine reasons.
The other categories are the “abusers” who are always late with payments or the “sloppy payers” who pay only some bills.There is the “distressed borrower” who might not have the resources to make the payments on new cards.
In this situation, lenders are trying to make a point that taking a calculated risk is worthwhile by making these fresh moves.
Revenues in the recent years seem to have declined by around $189 billion as lenders have observed.Earlier lenders had restricted credit lines to the prime customers only and around the same time, there were millions of Americans who were deliberately kept out due to the rise in delinquencies as well as the charge offs.