@smc733 wrote:
@laboi_22 wrote:I couldn't agree more. I respect AMEX and the way the run their business. There aren't many things today that I can be certain of but I know that AMEX will always be around and it's because of their conservative lending practices. If home lenders would have been as conservative as AMEX we wouldn't be taking about the state of our current economy.
Not at all true. Amex gave people credit that had no business getting credit, and gave way too large of lines pre-credit crisis. There's a reason they slashed many people's limits by 80-90%. They gave someone I know with no job, 18, in college back in 2005 a $2,000 Blue card... This is only a recent development of theirs to extend credit more conservatively...
They took plenty of bailout money. IMO, Discover is running how a lender should run, some call them "stingy", but they only hand out lines that even if you max them out, you could probably still pay back.
I wouldn't read anything into student cards: student cards are arguably the most high-risk of any lenders portfolios, and just like retirement advice says you should have a mix of different investments based on risk, lenders do this too.
@Back in 2005 before everything went to @#$* (and back in '97-'99 I suspect you'd see the same trend from lenders) college students were making RIDICULOUS amounts of money the day after they graduated from any top 50 and many top 200 schools. This was common, across the board, and kept happening over, and over, and over again. Giving a $2000 CL to a student wasn't stupid at that time, it was smart; however, when everything came tumbling down, oh then everyone can point fingers and state how they shouldn't have done that.
You can see from posts all over this board on how people respond to lenders which "treat them right," and this board by definition has a more educated perspective (about this topic) than the average individual; it's not too long of a walk to assume that most other non-forumites have even greater appreciation for this. Any credit extension has an element of risk to it, statistically even someone with a 800 FICO is still at roughly 1% probability to default; however, the opportunity with students back in the boom times was so fantastic, everyone bet on it. Then many students couldn't get a job after college during the Great Recession (guess that moniker finally was standardized), and suddenly it all looked sily, but it wasn't based on the information they had at the time.
@Open123 wrote:Regarding college students...
Very good point that in years past during the boom times, any college grad was almost assured of a $75 to $100k per year job upon graduation. Those days are long gone, and have been for a while now.
Also, in the past, student loans weren't the problem they are now. Recently, you have a high number of college grads who can't find employment, or if they do it's for very low pay, and have huge student loans in $100k range.
I think you're going to see underwriting reflect this new reality and lower student cards accordingly. This is why most people with a no or a short work history are under an higher risk of FR or 4506Ts, which even Citi has been requesting from certain cardholders.
Edit - The Card Act now places the responsibility on lenders to ascertain a borrower has income to repay debts. For example, you have stay at home spouses who have left the work force but have better credit ratings than their spouses rejected credit in some cases since they cannot prove any income. As with all well meaning legislation, there are always unintended adverse consequences. This could be one.
Excellent points, and that's something I hadn't put together yet: tuition simply costs more than it did even 4-5 years ago, whereas wages have stayed flat or reduced in that time (even discounting the unemployment rate). The UC system has doubled their tuition rate in that time for in-state residents, and while I suspect most other state-chartered institutions aren't in states with quite the same resource shortfall California is, it's likely still non-trivial. Private schools too likely all cost around the 45-60K annually too... we're talking near mortgage sizes now for student loans.
Thanks Open!