Lenders going after college students
Posted Under: Credit Card Trends,Interest Rates
I just ran across an article in NewCreditRules.com. The article dates back to April 2009 and I’m not sure that the concept caught on. I’m a long way past college age and I don’t know any college students that I can ask.
The idea is that FICO scores are significantly less useful for determining the credit worthiness of young people just starting out on their own, particularly college students. They have no credit history. So, instead of looking at a FICO score, they would look at things like grade point average, SAT scores, college major and other academic factors. Of course they gave it a fancy name; Human Capital Score.
The theory seems to be that a pre-med student with a high GPA is more likely to make payments than an art major.
Alan Samuels, People Capital (developers of the Human Capital Score) posted in the comment section saying, “Our ultimate aim is to produce a new lending environment for students to obtain funding for their educations.” I hate to break it to you Alan, but it’s already out there. It’s called Financial Aid and Student Loans.
I would agree that the traditional methods of judging credit worthiness leave something to be desired, but this sounds like just another way of saying, “How can we get more cards out there and suck up more ridiculous amounts of interest money.”
You can read the NewCreditRules.com article here.
What do YOU think-is this a good idea? Comments are encouraged!
Reader Comments
I recall many years ago reading somewhere that credit card companies knew that certain college majors were better indicators of dependability than certain other college majors, but that the companies ran into a lot of flak for making that distinction. I believe they might have been prohibited legally from making that distinction. If I am remembering correctly, and this was the case, why would a valid predictor be prohibited from being used…? Maybe it was considered not PC. Yet, we all make determinations all the time about who we are going to trust and not trust. It’s all-but-unavoidable.
I suspect that it was the PC thing. At this point, it appears to be PC – at least for now. It could change if someone makes an issue of it.