Citi: Penalized for not carrying balances

[smallfry]

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@Anonymous wrote:

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@smallfry wrote:

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@Anonymous wrote:

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@smallfry wrote:
74king FICO punishes those who pay off their home loans early. Makes sense right? Don't think so.

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What is your point?

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My point is very simple. Who carries the greatest risk? Someone with property and no debt or someone who has property with a mortgage on it? If I were lending money I would go with the guy who doesn't have anyone to pay that is standing in front of me.

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I'm getting into the Weeds now........Look both are dangerous that's how they see you, the person with the mortgage is more stable hence more credit worthy BUT that means nothing if he can't manage his finances. It doesn't matter if he has debt or not if you are a poor money manager....you will be in trouble and that's just the bottom line. Tell me if I'm wrong...

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Can't say you are wrong. My comments strictly are about the strange scoring system we are stuck with currently.

[Anonymous]

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@smallfry wrote:

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@Anonymous wrote:

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@smallfry wrote:

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@Anonymous wrote:

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@smallfry wrote:
74king FICO punishes those who pay off their home loans early. Makes sense right? Don't think so.

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What is your point?

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My point is very simple. Who carries the greatest risk? Someone with property and no debt or someone who has property with a mortgage on it? If I were lending money I would go with the guy who doesn't have anyone to pay that is standing in front of me.

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I'm getting into the Weeds now........Look both are dangerous that's how they see you, the person with the mortgage is more stable hence more credit worthy BUT that means nothing if he can't manage his finances. It doesn't matter if he has debt or not if you are a poor money manager....you will be in trouble and that's just the bottom line. Tell me if I'm wrong...

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Can't say you are wrong. My comments strictly are about the strange scoring system we are stuck with currently.

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Yes very true my friend....they are very strange indeed. Your comments are well respected. Good debate

[Anonymous]

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@smallfry wrote:

Can't say you are wrong. My comments strictly are about the strange scoring system we are stuck with currently.

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I think that this is the misunderstanding of FICO.  FICO is an indicator, not an absolute.  800 is NOT necessarily better than 750.  800 is an indicator, not an absolute score like a test score.

Somebody who has a 20 year plus credit file, well managed credit, reasonable DTI, etc. and scores 740 to 780 has better credit than somebody who managed to achieve 800 with 8 year history, 3 year AAoA, etc. (aka: thin CR).

FICO, being a dynamic calculation is not a linear progression nor linear scoring system.  Just as FAKO scores do not equal FICO, not all FICO scores are equivalent.

Look at it this way.  In poker, you and I can both have two pair.  But if I am Ace high and you are Jack high, I win, so to speak. 

In the land of FICO, the score is the high card showing face up.  But your CR is your full hand.  If you have an Ace or pair showing (score) this is an indictor of your hand, but not the hand itself. 

Both score, contents, actual history and lender policy play an important role in what the quality of your credit is.

Message Edited by txjohn on 05-16-2009 12:16 PM

[Anonymous]

That sound silly even if all revolving show $0 balance, if you the recent payment  is under 6 months that should consitute atctive revovling

[Anonymous]

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@smallfry wrote:

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My point is very simple. Who carries the greatest risk? Someone with property and no debt or someone who has property with a mortgage on it? If I were lending money I would go with the guy who doesn't have anyone to pay that is standing in front of me.

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Absolutely my point.

In other countries (e.g. Germany) major factor for issuing a credit card or giving a loan is the household income. You dont get a CL much more than twice you net income and if you already have a loan it is less of it. If they see you already have three or whatever amount of CCs, no way to get another one. Other things are the same, negative entries in your report means higher interest rates. 

Thats a fair workingsystem, and not like a one that blames ppl. for paying their bills.

Message Edited by Buckzball on 05-16-2009 01:31 PM

Message Edited by Buckzball on 05-16-2009 01:32 PM

[Anonymous]

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@Anonymous wrote:

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@smallfry wrote:

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My point is very simple. Who carries the greatest risk? Someone with property and no debt or someone who has property with a mortgage on it? If I were lending money I would go with the guy who doesn't have anyone to pay that is standing in front of me.

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Absolutely my point.

In other countries (e.g. Germany) major factor for issuing a credit card or giving a loan is the household income. You dont get a CL much more than twice you net income and if you already have a loan it is less of it. If they see you already have three or whatever amount of CCs, no way to get another one. Other things are the same, negative entries in your report means higher interest rates. 

Thats like a fair system is working, and not like a one that blames ppl. for paying their bills.

Message Edited by Buckzball on 05-16-2009 01:31 PM

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As additional incite:  Owning property free and clear and even having a high income does not mean you will repay a loan, not pay late or not get into credit trouble.

I have worked with individuals of high net worth and income who had horrible credit.  Paying obligations timely and as agreed is not always related to "ability" but in "willingness" and "priority" of doing such.  Some people, if paying bills gets in the way of toys, fun or convenience will delay, avoid or default all together, even though they had an income that would allow them to fulfill obligations if they managed their money better.

Thus as we have seen and heard:  The rich don't have less debt, just nicer toys. 

I have seen people with very meager incomes and resources who managed to maintain a budgetary discipline to pay obligations that many, if not most, would consider hopeless or too difficult to manage.  And I have seen those with such excess that not paying timely or as agreed is incomprehensible, yet was the circumstance at hand.

Having obtained a mortgage and paid says more to a lender than having bought a house for cash.  Having obtained an auto loan and paid timely says more to a lender than having paid cash.  Often those who pay cash do so of necessity rather than choice.  For those who have the option of either, that is a different discussion.

[smallfry]

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@Anonymous wrote:

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@smallfry wrote:

Can't say you are wrong. My comments strictly are about the strange scoring system we are stuck with currently.

---

I think that this is the misunderstanding of FICO.  FICO is an indicator, not an absolute.  800 is NOT necessarily better than 750.  800 is an indicator, not an absolute score like a test score.

Somebody who has a 20 year plus credit file, well managed credit, reasonable DTI, etc. and scores 740 to 780 has better credit than somebody who managed to achieve 800 with 8 year history, 3 year AAoA, etc. (aka: thin CR).

FICO, being a dynamic calculation is not a linear progression nor linear scoring system.  Just as FAKO scores do not equal FICO, not all FICO scores are equivalent.

Look at it this way.  In poker, you and I can both have two pair.  But if I am Ace high and you are Jack high, I win, so to speak. 

In the land of FICO, the score is the high card showing face up.  But your CR is your full hand.  If you have an Ace or pair showing (score) this is an indictor of your hand, but not the hand itself. 

Both score, contents, actual history and lender policy play an important role in what the quality of your credit is.

Message Edited by txjohn on 05-16-2009 12:16 PM

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Not a misunderstanding of FICO actually. I know it is not an absolute but is an indicator. Some pieces just don't fit into the puzzle.

[Underh20]

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Your CR also reports your historical balances and your actual payment amount last month.  So, if you had $2000 in charges, but paid $2000, they will see $0 balance with a payment amount of $2000.

If they see a historical $0 balance, current $0 balance and small or no actual payment.....why would they issue the card?  Unless it has a nice fat AF, they stand to make very little, if any, profit.  Issuers have a cost associated with issuing and maintaining new accounts. 

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In my case they do not see a $0 historical balance rather than one approximately 20% of my CLs.  When I PIF prior to their CRA reporting date, there will usually show no payment due and a current balance of $0.  For some strange reason, though, on some reports there is always a $10 payment due even though the account is only used two or three times a year (Macy's).

[Anonymous]

     Very informative and enlightening discussion.  My only contribution to the OP's thread would be KNOW YOUR CCC.

     Just as the CCC investigates your history prior to approval (i.e. FICO, income, DTI, etc.), I think its incumbent on us to learn the "business model" of the CCCs we seek credit from.. 

     For example, from my limited exposure to this Forum, I would not apply to AMEX if I wanted to carry a balance, have irregular buying habits, want to go on an app spree, or forsee problems with any other accounts.  Their "business model" appears to be based on traditional methods of "high merchant fees" annual fees to cardholders, and capital preservation. 

     CITI (the largest provider of Mastercard), on the other hand,charges "lower merchant fees" and rarely annual fees.  Their "business model" appears predicated on profiting from the "spread" between their cost of money from the FED (0% - 1%) and what they charge interest to cardholders.  They do not make money if you PIF every month.  They want you to carry a balance (assuming you establish good payment history).

     Thanks to this Forum, I've been able to research prospective credit cards through insightful discussions by the Contributors.

[Underh20]

Update:

I kept thinking about how strange it is to demand someone carry a balance and it came to mind that I have two Citibank offshore credit cards that are about 5 years old.  I always pay them off after the statement cuts because I am not worried about paying late since I have set up an automatic payment.  The only problem is that as offshore accounts they do not report to any of the US credit bureaus.  I mentioned this when I called for a recon, but they wouldn't accept this.

So I faxed a very nice request to Citibank USA and mentioned these accounts and that they could call Citibank's Asia-Pacific CEO for a personal recommendation on how I handle my finances with Citibank offshore.  They did.  Card approved.

Sometimes banks do do the right thing.