A borrower who defaulted on a mortgage during the recession is not necessarily a bad risk for a credit card lender. To properly evaluate risk in the current environment, First Data Corp. is adopting a new instant-credit decisioning and underwriting system from Zoot Enterprises Inc.

First Data will offer the service first to its credit card-issuing clients that need a deeper background about prospective customers' risk factors. The Atlanta transaction processor eventually plans to extend the service to other types of lenders.

"Certain things have changed in recent years that have affected how lenders evaluate credit card prospects, such as the fact that some people who are no longer paying their mortgages actually are still paying their credit card accounts regularly and are still good prospects," says Tom Johnson, Zoot's vice president of product and business development.

The trend of consumers staying current with credit card accounts while letting troubled mortgage loans go began during the recession when housing prices fell, analysts say.

Traditional credit-scoring models also tend to downgrade a person with an uneven job history, but Zoot's software enables lenders to more closely analyze such data, Johnson says.

"Before the recession, the fact that a person changed jobs three times in a year was looked at negatively, but today it could mean that a person is working three jobs and paying their bills," Johnson says.

Rising fraud trends also have created new obstacles for card issuers, and Zoot's software can sort through "the gray area" to more accurately determine a prospective customer's risk, he says.

Zoot's zOriginate software enables issuers to streamline the approval process for instant credit card offers made online or at the point of sale by expanding the data used to determine prospects' creditworthiness, Johnson says. The software also enables issuers to make adjustments for prospects' individual circumstances without compromising risk-management guidelines, he says.

First Data. a unit of the Kohlberg Kravis Roberts & Co. private-equity firm, is providing Zoot's software as a "complement" to existing loan-origination tools it offers its clients, says Phil Christiansen, a First Data vice president, in an email.

Drawing on nontraditional sources of consumer data, Zoot, of Bozeman, Mont., analyzes prospective customers' creditworthiness using "about 50 different data streams" of information about income and payment habits, Johnson says.

"The goal of the system is [to] provide fast, automated credit-approval decisions, and issuers can also do manual underwriting to account for unusual cases and exceptions" that are within an issuer's risk-management guidelines, Johnson says.

Zoot is seeing increased demand for its services as card issuers' interest in promoting private-label credit cards rises, he says.

"A growing number of banks that had walked away from private-label credit cards are getting interested in it again, and they want better tools to evaluate customers quickly and through a variety of channels," Johnson says.