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Credit Trends: Mortgages and New Credit Cards

Written by Janet Dedrick on October 25, 2011 in Credit  |   5 comments

Do you know anyone who has been turned down for a credit card recently? More likely, you may have seen someone get a new credit card now who may not have been able to three years ago. During the credit crisis, credit card companies tightened…

Mortgages and new credit cardsDo you know anyone who has been turned down for a credit card recently? More likely, you may have seen someone get a new credit card now who may not have been able to three years ago.

During the credit crisis, credit card companies tightened their regulations and had very strict guidelines about who could and could not open new credit. However, in 2010, one of the credit trends we saw was credit card companies easing their tighter card underwriting, and this has been continuing into 2011.

With credit card companies loosening their restrictions, more consumers are able to get credit and take advantage of more buying power. As our credit reporting models have shown, most consumers’ financial behaviors are linked together. Today, we’ll look more closely at credit card consumers and mortgage holders—and how the two overlap.

Credit card consumers and mortgage holders

What does holding a mortgage have to do with your credit card habits? Consumers with a mortgage are generally lower-risk customers, and credit card companies are willing to give them credit. Forty-two percent of new cards and almost 60 percent of new credit went to consumers with mortgages. On average, credit scores and available credit are higher for consumers with mortgages.

However, about half of the new credit card consumers with a mortgage have property values estimated at $200,000 or below. Thirty-five percent own a home worth between $100,000 and $200,000, and the majority of new credit card consumers have equity in their homes, contributing to their overall financial health.

Some financial markers are out of the consumer’s control. Real estate blogger Ilyce Glink has written about the housing market and how home values continue to plummet. About 35 percent of new cardholders with a mortgage are underwater on their mortgage. Even among new credit card originations for customers with a credit score above 700, 30 percent of those with a mortgage are underwater. But even with falling home values, these mortgage holders are still consumers in the credit world.

Home value and home equity are important factors because consumers with equity in their homes have a better ability to weather financial hardships like unemployment or unexpected medical expenses. However, we see no evidence of lenders using home equity estimates to regulate credit lines.

With uncertainty still present in the economy, credit card lenders are still cautious. We’ve seen new card originations in the last two years, but the credit limits are still tight. Credit lines offered when the new credit was opened were decreased dramatically across all score ranges in 2009 and remain low, but we have seen some easing in 2011.

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5 comments

  1. Frank says:

    If your credit history/score has suffered say from an unavoidable bankrupcy,don’t worry,wait til your insurance score catches up because it’s fixed to feed off your credit score and All your insurance premium will go up.Wow,just when you thought you had gained some ground.With Insurance scores it doesn’t matter if you never had a claim for an accident or on your home.You are now in a High risk group and the sad thing is,there’s not a thing you can do about it.What a country.

  2. Patti A. Duncan blueyedlayd@gmail.com says:

    where can I find out what my credit score is?

  3. alabama bankruptcy says:

    Bankruptcy can solve many financial problems- but not everything. Whether or not you are getting a lawyer to help you, you need to know what you are doing in your bankruptcy case so you don’t get burned.
    alabama bankruptcy

  4. Bob T. says:

    I think the credit reporting bureaus deliberately (read: discriminately) keep FICO scores low if you’ve had a foreclosure or short sale. I sold my home in a short sale almost 3 years ago, had over 800 FICO score and have never missed a payment (before or after the short sale), yet despite continuing to reduce the amount of credit I have outstanding my FICO score has not moved up AT ALL.
    I paid off a $24,000 vehicle, and an $11,000 mortgage on land, plus reduced the balances by 20% on the only 2 credit cards I have outstanding, yet over the past 3 years, I have not had a single increase in my FICO score. When questioning the credit bureaus, all they will say is that it is determined by a very complex formula and (they love this word) “algorythm”.

    Has anyone else experienced this “phenomenon”?

  5. Pingback: How Mortgages Can Affect Your Credit Card Application | Atlanta Real Estate Forum


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