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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 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.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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