If you have good credit you’re more likely to be eligible for a credit card as opposed to if you have bad credit and therefore bad spending habits. If you have bad spending habits you may go over and will have to pay the banks more money, so why aren’t they more interested in those with bad credit?
In: Economics
>If you have bad spending habits you may go over and will have to pay the banks more money, so why aren’t they more interested in those with bad credit?
Because in the worst case scenario, the person with bad credit goes bankrupt and the bank doesn’t get the full amount back that is owed – bankruptcy court can result in a significantly reduced amount owed or a longer-term repayment plan, or repossessed property that then have to be sold (costing time and money). Either way, it was a bad bet for the bank.
Banks and lenders as a rule like to have lots of small, safe bets. A person with great credit may only be paying small amounts of interest, but the bank can be much more confident that it won’t blow up in their face. They’ll take the smaller, safer payout, rather than the bigger, riskier ones.
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