Answered: Why might it be shortsighted to bluntly…

Why might it be shortsighted to bluntly refuse lending money or issue credit cards to people without a credit history—such as young students—or to consumers with less-than-stellar credit?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter6: Building And Maintaining Good Credit

Section: Chapter Questions

Problem 6LTAI

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Similar questions

How do sellers benefit from allowing their customers to use credit cards? Do sellers bear any risk if their customer does not pay their credit card bill?
True or false: An example of a soft inquiry would be a credit card company looking into your credit history to determine if they will approve you for their credit card or not. True False
What is adverse selection? Why does it predict that lenders will prefer to arrange loans through a commercial bank rather than deal directly with a borrower?
If a consumer with a relatively low credit score applied for a loan from your bank, what other criteria might you consider before deciding to grant a loan?
Your company provides credit to customers. Someof these customers default on their loans, with verynegative implications for you. Describe how you coulduse discriminant analysis to learn what distinguishesthe customers who default on their loans from thosewho pay back their loans. How might you use such amodel?
What bank regulations are designed to reduce moral hazard problems created by deposit insurance? Willthey eliminate the moral hazard problem?
What bank regulation is designed to reduce adverse selection problems for deposit insurance? Will it always work?
Why it can be dangerous to provide credit card information over the internet? Does it stop the risk if you only use credit card at local business?
Which type of information asymmetry explains why bad credit risks are more likely to seek bank loans? A. Moral hazard B. Adverse selection C. Principal-agent problem
Why might customers of big banks be reluctant to moveto a credit union?
Advantages and disadvantages of accepting debit and credit card transactions as opposed to accepting personal Cheques from customers? (Consider both internal control and business reasons)
Most credit cards charge a relatively high rate of interest, yet many people carry them, including people who would be considered low-risk borrowers. Our discussion of adverse selection said that low-risk borrowers should have been discouraged from these. What gives?