As banks seek to reduce their risks and avoid bad credit loans, it appears as though many are instituting the practice of loan profiling. This will make it increasingly difficult for anyone to get a bad credit loan, and many are crying foul at this common banking practice. There is a fine line between acceptable risk and actively seeking to ignore a large segment of the economy. Many are worried that this golden standard will affect the poor most of all, since they are usually the ones that are seeking bad credit loans. The situation is expected to get worse as the housing market continues to tank and banks look to reduce their overall risks.
Francis Ghiloni, director at financial information service mform.co.uk, said: “It tends to penalise those already worse off. If you have significant equity, are a good credit risk and have a large income you will be the kind of customer that a lender does not want to lose. On the other hand, if you are a young borrower with low earnings and little equity, you are less likely to be offered another deal, which means going on to an expensive SVR.”
Related reading: Bad Credit Loan
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