Goldman Sachs may accept 'subprime' Apple Card applications

Posted:
in General Discussion edited August 9
Apple Card is apparently being offered to more than just people with great credit scores, with Goldman Sachs allegedly approving applicants for the co-branded credit card with poor credit scores, in what could be a move to acquire as many customers as quickly as possible.




Apple is preparing to launch Apple Card in the United States in August, and has so far provided the service to a small-but-growing number of customers in a preview ahead of general availability. The preview is likely to be a test of the sign-up process, along with other elements, with applications able to be accepted or rejected within seconds of being dispatched.

According to CNBC, Apple Card partner Goldman Sachs is seemingly accepting applications from a wider array of customers than expected. While those with good credit scores are almost certain to be accepted for Apple Card, some with low scores are also finding they are being given the go-ahead to proceed with acquiring the card.

Some of the reportedly accepted customers have FICO scores below 660, which is generally thought to be the level considered to be "subprime" for loans and credit cards.

One customer highlighted in the report has a FICO score of around 620 and has been using a subprime card from Merrick Bank, but was "absolutely shocked" that he passed the checks to get the card. In that customer's case, he had a credit limit of $750 and an interest rate for Apple Card of 23.99%, a "lot lower" than other cards in his possession.






AppleInsider discussions with applicants found acceptance for Apple Card is not limited to just the credit score, as applications with higher non-subprime credit scores failed to go through. It is plausible there is a pre-launch limitation on accounts being created, though it is equally likely other factors are being taken into account in the application process.

Subprime borrowers may be considered a riskier proposition to financial institutions, which may be offset by higher interest rates on credit agreements. Subprime lending is believed to be one of the contributing factors of the financial crisis of a decade ago, with banks criticized for offering irresponsible subprime mortgages.

Given Goldman Sachs' image as an investment bank, the offering of Apple Card to subprime customers seems unexpected, but it already offers subprime loans under its consumer-facing Marcus bank. Approximately 13% of its $4.75 billion in personal loans are provided to borrowers with FICO scores below 660.

According to report sources, Goldman is aware it is providing the card in subprime cases. It is claimed Apple wanted the partner institution to approve as many of the over 100 million U.S.iPhone users as it can, while still staying within regulations and lending in a responsible manner.

It is said the policy is in line with Apple's intention to provide a good customer experience.

During discussions in the late 1990s with Capital One over a potential joint card, Apple co-founder Steve Jobs reportedly "had an aversion" to rejecting customers for an Apple-driven card. That ethos that likely spooked Capital One and prevented it from rolling out broadly. However, it didn't prevent Apple from having an Apple-branded hardware financing card, funded by GE Capital in the '80s and early '90s.

Goldman Sachs is thought to be spending heavily in its attempts to become more consumer-facing, with one report from July revealing it has spent around $275 million since the start of 2019 on Apple Card, Marcus, and other initiatives.

Concerns by investors that Apple Card isn't produced for maximum profitability have been refuted by Goldman's Marcus division chief Omer Ismail, by implying customer loyalty and engagement may be more important. "The idea that doing right by the customer means being less profitable is not just an idea we subscribe to,"Ismail advised. "If you do right by the customer, you're going to ultimately win their loyalty."
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Comments

  • Reply 1 of 127
    dysamoriadysamoria Posts: 2,257member
    I presume they’re not taking people with bankruptcy on their credit history...

    If only it wasn’t Goldman Sachs... or Wells Fargo... or... etc.

    Sigh.
    seanj
  • Reply 2 of 127
    schlackschlack Posts: 699member
    Would think it might be worthwhile to learn what features of iPhone owners correlate with paying back debt...so they could be running experiments by approving various sub-prime people for small dollar credits (i.e. $750)...think of it as building a labeled data set...and credit score alone is missing some of the population that would be responsible card holders.
    edited August 9
  • Reply 3 of 127
    s3obeds3obed Posts: 4member
    dysamoria said:
    I presume they’re not taking people with bankruptcy on their credit history...

    If only it wasn’t Goldman Sachs... or Wells Fargo... or... etc.

    Sigh.
    There are reports of people with BKs being approved. One 3 years post chapter 7 and another 5 years post chapter 7.
    Carnage
  • Reply 4 of 127
    SoliSoli Posts: 9,178member
    dysamoria said:
    I presume they’re not taking people with bankruptcy on their credit history…
    There's more to it than your credit score, but a bankruptcy usually isn't a detrimental factor. Perhaps most notably is that once you have a discharge you have to wait 8 years before you can file again. It really doesn't take a long time to regain a Good or Excellent credit rating after a discharge if you've actively worked to build and maintain a credit history in good standing.
    cornchipJWSCdavgreg
  • Reply 5 of 127
    I love how these articles always make it sound like the bank is the one taking on the risk by offering credit cards. In reality, it's the card user that's taking on the vast majority of the risk. That's the reason why banks are in the credit card business.
    StrangeDaysEcho7SierracornchipFileMakerFellerseanjdysamoria
  • Reply 6 of 127
    MplsPMplsP Posts: 1,547member
    dysamoria said:
    I presume they’re not taking people with bankruptcy on their credit history...

    If only it wasn’t Goldman Sachs... or Wells Fargo... or... etc.

    Sigh.
    Credit card companies extend credit to the users and part of that is accepting some risk that the funds won't be repaid. There are many reasons for bankruptcy, but ultimately it means the consumer got into a situation where they could not cover their obligations and legitimately affects your credit score. 

    If you have bad credit, the best thing you can do is be responsible with your spending and build it up again. It takes time, and you won't be getting great offers, especially early on, but things will improve.

    Judging by what was posted in the other thread, they are being pretty picky - people with credit scores over 800 were getting a very mediocre rate of 18%. I'm curious about what someone with a score of 650 would get.
  • Reply 7 of 127
    davgregdavgreg Posts: 421member
    So much for being a high end brand...

    For an encore they will start renting furniture and selling used cars at a “pay here” lot.
    bigtdsCarnage
  • Reply 8 of 127
    maestro64maestro64 Posts: 4,637member
    Of course they are, they want those who will pay 25% since people with very high credit rating do not pay interest and pay off debt quickly and usually do not have a large credit liability.
    SoundJudgmentFileMakerFellerrossb2dysamoriabaconstang
  • Reply 9 of 127
    664 and denied...  :/
    cornchipGeorgeBMacEcho7SierraJWSCcaladaniandysamoria
  • Reply 10 of 127
    sflocalsflocal Posts: 4,674member
    These folks should be working on rebuilding their credit/financial lives instead of applying for more credit cards.
    chemengin1anantksundaramCarnage
  • Reply 11 of 127
    SoliSoli Posts: 9,178member
    sflocal said:
    These folks should be working on rebuilding their credit/financial lives instead of applying for more credit cards.
    You can't rebuild your credit without rebuilding your credit.
    edited August 9 tomkarlcornchipcharlesatlasJWSCronnmacguibeowulfschmidtDave Kapdysamoria
  • Reply 12 of 127
    GeorgeBMacGeorgeBMac Posts: 4,946member
    The part the analysts are missing is:  The mere fact the person has an iPhone and cell plan (assuming that they do), automatically means that they have some financial means.   So, when they give them a very low credit line, their risks are minimized.

    To equate this to the subprime mortgages -- where people with rotten credit and little or no income were given huge mortgages - is a false equivalency.
    cornchipmacguirandominternetpersonDAalseth
  • Reply 13 of 127
    mike54mike54 Posts: 347member
    Most people applying Apple Cards are most likely not poor and likely to have, on average, a higher credit score than your average applicant for a joe-blogs credit card, so Goldman Sachs is adjusting the interest rates up for those with even good credit scores. High profits are made on these interest rates and Goldman Sachs is of course in it for the money. And as a result, it seems Goldman Sachs have done their calculations for projected profits and now will be chasing people with low credit scores because that's where even more money is.



    edited August 9 GeorgeBMac
  • Reply 14 of 127
    It all makes sense now why this card is such an abysmally mediocre offering. There is a reason why high end credit cards (e.g, Chase Reserve) only approve those with solid credit.
  • Reply 15 of 127
    jbaughjbaugh Posts: 26member
    My daughter got an invitation yesterday. But she was denied. Her credit score is >800. I suspect she was denied because her current income is only $25K. I am still waiting for an invite. I’m checking daily to see if I can apply without an invite like others report. With my income and high credit score I should be quickly approved. I’ve removed my credit freeze temporarily in anticipation of applying. 
  • Reply 16 of 127
    Rayz2016Rayz2016 Posts: 4,716member
    jusjeff said:
    664 and denied...  :/
    Yes, I imagine that they’re taking into account more than just your credit score. 

    It’s quite possible that folk with lower scores will get approved if they have a high enough income. 

    I worked for for a credit card company a while back, and the offer formula is not as simple as AI believes it to be. Not only that, but the formula can change a n response to market forces. 

    We once ran the workforce through test applications, and found that contractors with higher pay and no debt were less likely to get an approval. 
    JWSCFileMakerFellercaladaniandysamoria
  • Reply 17 of 127
    StrangeDaysStrangeDays Posts: 8,244member
    sflocal said:
    These folks should be working on rebuilding their credit/financial lives instead of applying for more credit cards.
    Hey do you say the same to the entire construction and commercial development industry, which is based entirely on credit? Huge swaths of corporate America is run on credit, not cash. They do the exact same thing people do. And guess what happens when they fail or file bankruptcy? Creditors lose out. But you know what happens to the actual people running those corporations? The executives? Nothing. Absolutely nothing. 

    In reality it is normal citizens, non-corporate people, who suffer in lending. Corporations aren't people and as such do not experience suffering. Irresponsible executives continue to become personally wealthy.

    This is the nature of the rigged economy. Corporations don't suffer failure the way small fry do.
    cornchipronncharlesgresFileMakerFellerdysamoria
  • Reply 18 of 127
    SoliSoli Posts: 9,178member
    Rayz2016 said:
    We once ran the workforce through test applications, and found that contractors with higher pay and no debt were less likely to get an approval. 
    Several years ago I paid off my car and student loans early within a month of each other which caused my credit rating to drop from well into the Excellent range with an 800+ score to around 740–750 range which only Good. Within a couple months I had gone back up to Excellent, but I would've been hurt had I tried to secure a great interest rate during that time.
    edited August 9 GeorgeBMaccaladaniandysamoria
  • Reply 19 of 127
    MplsP said:
    dysamoria said:
    I presume they’re not taking people with bankruptcy on their credit history...

    If only it wasn’t Goldman Sachs... or Wells Fargo... or... etc.

    Sigh.
    Credit card companies extend credit to the users and part of that is accepting some risk that the funds won't be repaid. There are many reasons for bankruptcy, but ultimately it means the consumer got into a situation where they could not cover their obligations and legitimately affects your credit score. 

    If you have bad credit, the best thing you can do is be responsible with your spending and build it up again. It takes time, and you won't be getting great offers, especially early on, but things will improve.

    Judging by what was posted in the other thread, they are being pretty picky - people with credit scores over 800 were getting a very mediocre rate of 18%. I'm curious about what someone with a score of 650 would get.
    They get denied, like me. 
  • Reply 20 of 127
    rogifan_newrogifan_new Posts: 4,147member
    MplsP said:
    dysamoria said:
    I presume they’re not taking people with bankruptcy on their credit history...

    If only it wasn’t Goldman Sachs... or Wells Fargo... or... etc.

    Sigh.
    Credit card companies extend credit to the users and part of that is accepting some risk that the funds won't be repaid. There are many reasons for bankruptcy, but ultimately it means the consumer got into a situation where they could not cover their obligations and legitimately affects your credit score. 

    If you have bad credit, the best thing you can do is be responsible with your spending and build it up again. It takes time, and you won't be getting great offers, especially early on, but things will improve.

    Judging by what was posted in the other thread, they are being pretty picky - people with credit scores over 800 were getting a very mediocre rate of 18%. I'm curious about what someone with a score of 650 would get.
    I haven’t gotten a notification yet. I’m curious what rate I’ll get if I’m approved. My credit score is 805.
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