Credit Card Offers Are Back. Is That a Good Thing?

A troubled market

(Photo courtesy of

(Photo courtesy of

Lenders are starting to offer credit cards to consumers again. It’s no secret that lending to troubled borrowers was the beginning of the credit-industry downfall. Have credit card companies learned a lesson? Or are they headed down the same road again?

Brenda Jerez, who recently overcame credit problems by slowing paying off each bill in installments after medical expenses and emergencies left her $50,000 in debt, is already being solicited by credit card companies again. Said Jerez, “It’s like I’ve got some big tag: target this person so you can get them back into debt.”

Targeting troubled-credit consumers like Jerez  seems like a sure-fire way to repeat the cycle of default lending. But this type of consumer is the biggest customer base for many credit companies.

The next troubled market

Lenders are use sophisticated techniques to target consumers by creating detailed profiles of their financial health. It’s estimated that over 100 million Americans have been profiled thus. The information is sold to other credit companies, mortgage brokers, and banks that all compete for the next untouched market, and they seldom care if that untouched market is less than qualified. Jim Campen, executive director of Americans for Fairness in Lending, said, “They get people who they know are in trouble, they know are desperate, and they aggressively market a product to them which is not in their best interest…It’s the wrong product at the wrong time.”

Predictive modeling

Predictive modeling is a new tactic being used by credit card companies to predict the likelihood that consumers will need lenders, even before the consumers know it. Sometimes bulk letters are sent to homeowners asking if they want to refinance. Later, via email or telemarketing, lending companies find out whether the consumers threw the forms out or used them. This can indicate to companies offering credit cards or home loans which consumers may be in the market for a refinance loan in the near future.

Mortgage triggers

Mortgage triggers are another strategy used by mortgage loan companies is. When a consumer applies online or at a bank for a home loan or refinance, banks automatically get their name and information and can check their credit history. Then they offer the consumer loans and vie for their loan package.

Since 2005, Experian, Equifax, and TransUnion all have sold lists of consumers who request loans to banks and mortgage brokers. Alan E. Geller, CEO of Vision Marketing, said, “We call people who are astounded . . . they say, ‘I can’t believe you just called me. How did you know we were just getting ready to [request a loan]? We were just sitting back laughing.”

Benefit or detriment?

So the question remains whether or not this form of credit is truly a benefit to consumers, or if it’s just another way for credit card and mortgage lenders to trap people once again. Many experts maintain that it is beneficial to have credit available, but they also warn that without a solid plan to tackle debt, consumers may find themselves in even worse financial predicaments than the ones they are in now.

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