Credit Card Companies Team Up With Credit Karma To Increase Bank Loans

Not long ago we spoke about a fairly Orwellian
new credit system in China. Well, now the largest credit card companies
in the United States are teaming up with the free personal finance company Credit Karma
to help members of the service get approved for bank loans. This could be a benefit for some consumers,
especially in light of new changes on the horizon related to how credit scores will
be calculated. Here to explain is Mollye Barrows, contributor
for America’s Lawyer. Mollye, great to see you again. I mean, how will these partnerships work? Well, this is actually pretty interesting. According to an article by the Wall Street
Journal, two of the largest credit card issuers are going to be sharing their closely-guarded
underwriting models with Credit Karma. And this is basically part of a new process
that’s going to make it easier for members who use Credit Karma to know which loans they
could potentially qualify for before the even apply. Now the benefit to credit card companies of
course is that they could bring in potentially new borrowers, it can streamline the loan
approval process, and the benefit for Credit Karma is that it is exactly in line with their,
“Everyone benefits,” business model. Of course they analyze your credit score,
they recommend products that are intended to save you money, and then if you, as the
consumer, buy that product then Credit Karma gets reimbursed by the lender whose product
was purchased. So this could be certainly, certainly beneficial
for Credit Karma and credit card issuers. Yeah, and you might not have to get all those
dings on your credit reports for doing things that you- Yes. Just for checking. Mollye, what are the changes that are proposed
for these FICO credit scores? Well, it’s interesting. It’s called a new opt-in Ultra FICO credit
score. So basically it’s going to roll out, start
rolling out rather, in 2019, and whereas before, those credit scores had been calculated based
on how often, how timely you are making your payments and your debt-to-income ratio, this
particular change has given lenders a little bit of leeway. Say initially you don’t qualify based on those
two calculations, well then they’re going to go and take a look at how much is in your
bank right now? Are you overdrawing? If you’re not withdrawn, if you consistently
have several hundred dollars in your account, you have continuous activity, then they’re
going to recalculate your score under this new Ultra FICO credit system. So that’s going to make it a little bit easier
for people to be able to qualify for some of these loans, especially younger folk and
folks that have been typically left out of the … Or who wouldn’t qualify typically
for loans like this. I mean, that’s about seven million people. So those folks who have credit scores in the
mid to upper 600’s, this is going to make them eligible for loans they previously weren’t
eligible before. So that, combined with the Credit Karma opportunities
there, it’s going to be a little bit easier for millions of people to get loans. Sounds like great news for consumers and we
appreciate you giving us the updates. Mollye Barrows, contributor for America’s
Lawyer. Thanks for your time, Mollye.

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