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Chase and other major banks will reportedly give credit cards to people with no credit scores

Friday, May 21, 2021 by Robinhood Snacks |

No more FICO scores on Hinge... even 800s. JPM Chase, Wells Fargo, and other banks are taking the “history” out of credit history. When reviewing credit card applications, banks will consider deposit account info for people with no credit, according to WSJ's #PFWTM — and share that info with each other. Think: $$$ in checking and savings accounts, and overdraft history. It's part of a gov-backed initiative to extend credit to underserved people. The pilot, aimed at financially responsible people without credit scores, could launch this year.

  • To build credit, you need to borrow. Think: credit card spending, car or student loans, or a mortgage. To build good credit and avoid interest, you need to pay IOUs on time.
  • The "chicken or the egg" of the banking world: When you've never had a credit card, and need a credit score to get a credit card with your bank (womp).

Give the people credit... 53M adults in the US don’t have credit scores — many only pay with cash/debit, or are new to the US. If this program launches, Chase could check your Wells Fargo checkings when reviewing your Chase card app. That means millions more Americans could get access to credit — and it could be a boon for banks and credit card companies.

  • Banks make $$$ from merchants each time you swipe. That "Swipe Tax" is why purchase minimums exist (the bodega doesn't want plastic for a $2 muffin).
  • Banks also earn interest on overdue balances. But thanks to stimulus checks and #lockdownlife, Americans have reduced their credit card debt (big time): balances are now $157B lower than pre-pandemic.
THE TAKEAWAY

Credit = opportunity... Good credit can help people take out cheaper loans like mortgages. Homeownership has been one of the greatest contributors to wealth creation for families. But mortgages are hard to get without a credit score. In 2015, Black and Hispanic adults in the US were more likely than white or Asian adults to lack credit scores — and they're still more likely to be denied mortgages. Increasing credit access to historically disadvantaged communities is key to narrowing the racial wealth gap.