How do credit card companies determine customer’s interest rates?

Lenders generally use a mathematical formula to determine a desired yield in setting interest rates for their products. Then they look at the market and competition in the market. These are two primary factors used in the methodology for setting interest rates.

Interest rates can be adjusted up or down according to credit scores, however most credit card companies run bureau reports and select prospects based on credit scores before sending mail solicitations. So, they know the credit scores match the interest rates before soliciting the prospective customers.

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