Consumers love shopping for credit cards over the Internet but are less likely to respond to mortgage offers. And some consumers are damaging their credit ratings by responding to too many online credit offers. These two issues were discovered in two research reports released separately this week. 

According to a newly released PSI Global Financial Services Research study, 47% of web credit shoppers applied online, but in the case of those who were looking for a new card account, 61% filed applications via the Internet. By contrast, only 23% of consumers who researched mortgage loans applied online, and even fewer, just 16%, of those who shopped for auto loans or leases, applied online. PSI found that consumers will readily respond online to offers for new credit card account, but are far less willing to complete the more detailed applications required for other types of credit, such as mortgages. Fully 44% of online credit shoppers said that too much confidential information is required in an internet application, and 56% percent of shoppers who do not apply online share this belief. The research firm says customers want assurance that their personal financial information will be handled in a secure, confidential manner. The PSI study identified price and the reputation of the lender as key factors in increasing online applications for credit. The ability to speak to a lending specialist during the loan process was important to 38% of online credit shoppers in the PSI Study and to 47% of those who did not apply online. Among consumers who anticipate shopping for credit online in 2000, 15% said they were "very likely to apply for a credit card; 7%, a mortgage; and 7%, other types of loans.

Meanwhile, consumers shopping for loans online are damaging their credit ratings, says the Gartner Group. As consumers look for some of the best interest rates on various loans, Gartner says the number of inquiries into a consumer's credit report can cause a decline in the consumer's credit score. Gartner analysts said sometimes the borrower's credit score declines so drastically because of these inquiries, that the applicant must wait months before being eligible for the same rate again. The research firm says today's credit scoring algorithm is not appropriate for online credit and lending applications, and it must be revised before it seriously undermines consumers' trust and retards the growth of e-lending. The brick and mortar part of the industry has addressed this issue in the past and modified it enough to suit its needs. A borrower rarely waits for more than two weeks to find a rate through a brick-and-mortar mortgage broker, and the modified credit score will reflect only one inquiry into the borrower's report during that time. However, online consumers expect to shop as often as they want for as long as they please before deciding on a lender. It is this behavior that will needlessly decrease their score. Gartner says more than 13 million U.S. consumers have applied for new credit cards, mortgages, and auto loans and even more have researched for loans online. Nine million U.S. consumers have applied for credit cards, about 2 million U.S. consumers have applied for auto loans, and a small number have applied for mortgages online.