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US-based banks to issue credit cards to people with no credit scores

Friday 14 May 2021 13:10 CET | News

US-based banks have planned to start sharing data on customers’ deposit accounts to extend credit to people who have traditionally lacked opportunities to borrow, according to WSJ.

This plan is part of a government-backed initiative. Some of the largest US-based banks, such as JP Morgan, Wells Fargo, US Bancorp, and others will factor in information from applicants’ checking or savings accounts at other financial institutions to increase their chances of being approved for credit cards. The pilot programme is expected to launch in 2021. It is aimed at individuals who don’t have credit scores but who are financially responsible. The banks would consider applicants’ account balances over time and their overdraft histories.

The effort, if successful, would mark a significant change in the underwriting tactics of big banks, which for decades have enshrined credit scores and credit reports as the main tools to determine who gets a loan. They generally reflect a person’s borrowing history in the US, including whether they pay their loans on time. Those who pay only with cash or debit cards, or who are new to the US, often don’t have credit scores.

Some 53 million adults in the US don’t have traditional credit scores, according to Fair Isaac, the creator of FICO credit scores. Many are often limited to payday loans and other costly forms of credit.

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Keywords: JP Morgan, banks, credit card, credit scoring
Categories: Banking & Fintech | Cards
Countries: United States
This article is part of category

Banking & Fintech