A USA Today article is reporting that lenders are dropping credit lines on high FICO score borrowers at more than twice the rate of high-risk borrowers. Those borrowers with higher credit scores tend to carry a lower balance (earning the lender less interest) and pay on time (earning the lender less in penalties and fees). The data is showing that lenders would rather take a higher risk borrower, facing a higher possibility of default, over a lower risk borrower since the profit level is higher. I find it a bit disappointing (though not surprising, given the bank issues of late) that banks are relying on fees and penalties for profit.
Posted under General
Written by Matt on April 5, 2009
That’s how they got us into this mess, and they are still doing it. Of course, they want the high risk customers. High risk means high reward. The flip side is disaster.
What a pity and it certainly is a mess. If all those high risk people file bankrupt what then?
The whole banking industry is such a corrupt institution. Sometimes I think the whole economy needs to collapse, so we can start over with something saner.
It’s a shame you need to play the game in order to be able to get a mortgage and that we live in a world where there’s little possibility for most of us to buy a home without a mortgage.