Apple Card applicants with low credit scores getting approved: report

Some people with less-than-stellar credit scores are getting approved for the new Apple credit card that launched this week, CNBC reported.

The bank behind the Apple Card, Goldman Sachs, has reportedly been approving applicants with “subprime” credit scores – a term with a varying definition but often defined as any score around 670. That comes at Apple’s direction, the report said, as it wants to make sure that as many iPhone users as possible get approved for the Apple Card.

Apple launched its new credit card under the premise that it would be incredibly popular among consumers, with its low interest and no fees. However, approving credit cards for people with low credit scores comes with risks, as a lower credit score tells financial institutions that you’re a higher-risk borrower.

The financial crisis of the last decade has been largely attributed to financial institutions who approved loans for borrowers with subprime credit scores, and who defaulted on their payments.

But CNBC reported that although people with subprime credit scores were being approved for the Apple Card, Goldman Sachs won’t provide users with more credit than their credit-score profiles suggest they can handle. Of note is that Goldman Sachs has long been lending to subprime borrowers and has said that the practice helps it predict future economic cycles.

iPhone users can now apply for the all-white, minimalist-in-design Apple Card. The card has a number of consumer-friendly features that make it incredibly easy to activate and use. The Apple Card also comes with no annual fees, late-payment fees, or fees for international use, and the interest fees are “among the lowest in the industry,” Apple says.

However, the push to eliminate fees has made some financial analysts concerned about the Apple Card’s business model, since credit-card fees and interest amounted to an estimated $178 billion total in the US in 2018.

But Goldman Sachs executives have told Business Insider the Apple Card will help to build customer loyalty in the long run, which is more advantageous than immediate revenue.

Neither Apple nor Goldman Sachs were available for comment at the time of publication.

https://amp.businessinsider.com/apple-card-goldman-sachs-subprime-credit-scores-report-2019-8