With massive issuing of credit cards even a few percent of dishonest clients may cost the bank huge money. Therefore, scoring is a must for effective credit business, since financial establishments are not charity institutions but companies who work to gain profit.
In simple words, scoring is a mathematical model by which the bank, based on past experience, determines the probability that the borrower will return the loan on time. The key principle here is the assumption that the future client will behave in a manner similar to the existing clients.
What Has Changed in Issuing Cards Today?
It was not that easy to get a credit card ten years ago. The process of application for this banking product presumed numerous visits to the banks, and the time to get an approval could be delayed for a period of one week. Nowadays everything changed dramatically. The process became much quicker and easier due to the following aspects:
- banks combine individual approach with scoring algorithms for applications processing;
- there is a number of instant credit cards with very limited features which are of a low risk for the bank.
- access to applications for loans and Bureau of Credit History data online.
These factors allowed issuing a credit card quickly and even without visiting the financial establishments by client (with delivery of plastic by the post).
Why Do Clients Need More Than One Card?
Why would one want to open several credit lines? There are sensible reasons for that:
- Firstly, it is a normal practice to open several plastics of different levels and classes for supporting personal financial stability.
- Secondly, in some cases it is even more convenient and more profitable. Different types of plastics from several financial establishments allow you to participate in a variety of client programs, enjoy a system of bonuses and loyalty when shopping in mall and on-line purchasing, etc.
- Thirdly, plastics with a small initial limit can be more acceptable by cardholder. Several such plastics under different terms allow to “get” the right loan amount without borrowing a huge sum in one go from one-single bank. Some people find that psychologically easier.
- Fourthly, it is easier to manage the budget and payments for loans, including temporary financial difficulties, while avoiding delinquencies.
Modern market of banking services is highly competitive. Despite financial establishments imply strict terms on cardholders in terms on due payments on loan, in reality they are fighting to get clients. If the bank learns that you have a credit card from another establishment, this means that another security service has already checked you, and your chances for getting additional card will be higher.