Online Credit Shopping

Two recently released studies address, first, the frequency with which consumers apply for credit online and, second, the effect on consumers' credit ratings of applying for credit online. PSI Global Financial Services Research reports that 61 percent of web credit card shoppers applied for credit cards online, but 23 percent of consumers testing the market for mortgage loans actually applied for a mortgage loan online. Just 16 percent of those looking for an auto loan or lease applied over the web. The principal barrier to online credit shopping appears to be consumers' concerns about the amount of private information required to apply for a loan. Of those who did not shop for credit online, 56 percent cited privacy concerns for their decision, and 46 percent of those who did not apply for mortgages or auto loans were similarly concerned. Consumers are still not fully comfortable with web commerce. Almost half of those who did not apply for credit and two-fifths of credit shoppers expressed a desire to be able to speak with a human.

The Gartner Group has concluded that consumers who shop and apply for credit cards on the web may be damaging their credit scores. The algorithms of many credit-scoring systems lower the credit score in response to the number of inquiries. Consumers who clutter their credit reports with multiple inquiries may have to wait many months before their scores revive. Of course the score would not be affected if a consumer is simply checking the interest rates available online.