@Revelate wrote:
@Bman70 wrote:
@Revelate wrote:Except the vast majority of the consumer population isn't affected by what we're seeing here.
When the average American has something like 5 or fewer credit cards, they're not going to stumble over the 5 cards opened with other institutions in 2 years that appears to be the reputed current UW standard.
If I had to guess they'll be evaluating this new stance for six months or a year at a minimum dependant on what they perceive as the problematic pattern.
If the vast majority isn't affected, then by inverse deduction (I made that up), the small affected population isn't significant enough to cause Chase financial problems. Why implement a whole new underwriting strategy just for a statistical blip?
I personally do think it has to do with temporary sagging economic growth levels, and Chase temporarily modifying their approach. Being more picky. Once things pick up, their strategy will probably loosen too.
Somewhere back around 2005 JPM Chase had 88 million credit cards issued; I suspect that number is likely similar today.
Source: http://www.scranton.edu/faculty/hussain/research_files/ValuationOfBankCreditCard200703.pdf
Can anyone suggest with a straight face that the numbers of churners or ice cream shoppers was more than an a tiny fraction of that? Lenders will quickly move to smash policies which cost them money in virtually any amount if they notice a trend; I've personally seen UW guidelines change in the span of an hour at multiple lenders I've worked at when something wrong was noticed (and some even faster), it's just not hard to accomplish technology wise on any reasonably written application infrastructure.
Also I can tell you with authority that lenders do watch this and other forums; there's been direct actions that even I was aware of as a volunteer moderator, and likely far more that I wasn't. It's not hard to find the pattern if it's handed to you on a silver platter from a data mining perspective.
While I don't think the current working theory is quite accurate and I suspect there's more to it than the simple metric people have so far ascribed to it, to suggest that just because it was an outlier behavior the banks wouldn't take action on it is simply does not match the experience I've seen first hand. While I agree they may well loosen up I doubt it'll be anything more than the numbers of accounts involved unless they come up with the 1 bonus award per lifetime some people have suggested or similar: if you find a class of unprofitable customers in any market (financial services or anywhere else) it's in your best interests to encourage them towards your competitors... and if we're anywhere close to accurate with how Chase is approaching this, they're doing that exactly right.
ETA: I do really like your term btw
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To add though, from the Gallup April 2014 poll:
http://www.gallup.com/poll/168668/americans-rely-less-credit-cards-previous-years.aspx
Mean (all) 2.6 cards per average American
Mean (card owners only) 3.7
More interestingly, the 5+ card crowd: 16%, of which 9% is 5-6 or 7% like most of the people on the forum who have stuck here for any amount of time > 1 year (at least in the Credit Card and associated boards).
This doesn't affect that many customers as a result, actually given that app sprees aren't normal behavior, I suspect the numbers affected are even smaller than what might be rationally expected. Other than students who really falls into this behavior in normal non-"credit-educated" life?
I think this post does a great job highlighting the big picture. The perplexing issues remain...
1) The people being turned down may be done because they are a CREDIT RISK from opening up so many new accounts.
---- If this is the case, it makes the most sense. However, we have seen credit portfolios that are flawless get denied...so this can't be all-encompassing. Unless Chase is going back to being super conservative- which I consider the most likely cause.
2) The people being turned down may be done because they are UNPROFITABLE from churning.
----Considering that the policy on receiving the sign up bonus hasn't changed, and is still the same frequency of the card denials, this doesn't make a whole lot of sense. I mean, if someone signs up for the card and doesn't get the sign up bonus during that two year period, then it isn't unprofitable. Making them wait two years guarantees they are eligible for a new signing bonus.
---- Now, a variation I can see of this that may work is they are hoping to make the churners so mad that they stop re-applying. This is plausible...but is such a miniscule population that this would surprise me. If this is also the case, why would the slate be included?
So many questions, so little answers.
@Anonymous wrote:I think this post does a great job highlighting the big picture. The perplexing issues remain...
1) The people being turned down may be done because they are a CREDIT RISK from opening up so many new accounts.
---- If this is the case, it makes the most sense. However, we have seen credit portfolios that are flawless get denied...so this can't be all-encompassing. Unless Chase is going back to being super conservative- which I consider the most likely cause.
2) The people being turned down may be done because they are UNPROFITABLE from churning.
----Considering that the policy on receiving the sign up bonus hasn't changed, and is still the same frequency of the card denials, this doesn't make a whole lot of sense. I mean, if someone signs up for the card and doesn't get the sign up bonus during that two year period, then it isn't unprofitable. Making them wait two years guarantees they are eligible for a new signing bonus.
---- Now, a variation I can see of this that may work is they are hoping to make the churners so mad that they stop re-applying. This is plausible...but is such a miniscule population that this would surprise me. If this is also the case, why would the slate be included?
So many questions, so little answers.
Re 1) I don't see it personally - back in the nasty days people along all sorts of strata were getting their reports dirty and to be gold plated now you had to come through that clean or otherwise be super ninja credit report cleaner. By and large people aren't defaulting or even going late now, I'm not certain what has Chase spooked so badly to go back.
I think Chase among others has had the "too much available credit" excuse previously, there wasn't a need to invent another if this were the case.
Likewise there are still people getting approved (or sitting on a mailed pre-approval printed after this change appears to have gone into affect, hi!) that just aren't clean - I have a tax lien, collection, and a 30/60 late on my reports right now, traditionally speaking if they were worried about reducing credit exposure they'd change the UW standards for the CSP from the 680ish (may be lower now) and go back to the 720-740 tier they were UW at pre-2012 changes where both Chase and Amex and quite possibly others dropped their approval standards nearly overnight: that would cut me off at the knees seeing as how Chase appears to underwrite most CC apps on a FICO 8 standard... or certainly their AR's are done on that based on reading the FICO Open Access tea leaves.
If I get denied it'll be an interesting recon, as my file isn't clean, my FICO score isn't godlike, and Chase is incredibly well aware of my impending mortgage since that account will show up their internal database before I make my application for the CSP as they are underwriting it and will likely be in their portfolio for a while. On the flipside I do neatly skirt the apparent new UW guidelines as I've only opened up 2 credit card accounts in the last two years so we'll see how they're going to play it.
It's probably a useful datapoint regardless.
Re: 2) how can you say the rate of denials isn't changing? It absolutely is for people on this forum, FT, and similar, the question is how is it overall? I haven't looked at a major lender's 10-Q in a while, but do they report their total CC portfolio as a result of the exposure / reserves information in it? Would be interesting to look at as you suggest between last year, Q1, Q2 and Q3 as if we assume approvals / closings are somewhat constant when looked at in aggregate that might be enough to go on based on how stingy Chase is with CLI's figuring additional exposure would be account openings and reduction would be account closings.
We can data mine too .
Also to point out, there's a non-trivial percentage of people on this forum even who applied for the CSP, took the bonus, and then got buyers remorse even after a year, constant piece of advice is to close the card if it has an AF and you're not using it. I think the forum members are unprofitable anyway and that's without the bonus churners .
Little anecdotal point from Finstar's recent approval: analyst explicitly mentioned that only one card had been recently closed, which rather suggests they're looking potentially at both account openings and closings with this new guideline.
