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Valued Contributor
mxp114
Posts: 1,356
Registered: ‎09-01-2011
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Re: "Too much available credit"?...Just didn't sound right...

How can too much credit be part of the score when income isn't? So that's no surprise however all of the majors including Citi, Chase, BofA, Discover and American Express have declined cards/CLIs if they determine you have sufficient credit available.

Valued Contributor
bs6054
Posts: 1,673
Registered: ‎11-11-2012
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Re: "Too much available credit"?...Just didn't sound right...


mxp114 wrote:

How can too much credit be part of the score when income isn't? So that's no surprise however all of the majors including Citi, Chase, BofA, Discover and American Express have declined cards/CLIs if they determine you have sufficient credit available.


I guess the score is meant to be indicitive of risk of default.   I would think that the issuers are also interested in "Will I make money of this customer if I give a card?" 

 

I have asked for income as part of the app process, and if I can see that existing credit lines are high compared to income, and that existing credit isn't being heavily used AFAIK (because the reported balances are small), then maybe I can assume that this person isn't going to be a "serious" user on my card, and may just be collecting CL and/or sign-up bonuses.

 

No idea if any issuer really goes through this thought process!

Senior Contributor
Open123
Posts: 4,089
Registered: ‎02-23-2011
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Re: "Too much available credit"?...Just didn't sound right...


bs6054 wrote:

I guess the score is meant to be indicitive of risk of default.   I would think that the issuers are also interested in "Will I make money of this customer if I give a card?" 

 

I have asked for income as part of the app process, and if I can see that existing credit lines are high compared to income, and that existing credit isn't being heavily used AFAIK (because the reported balances are small), then maybe I can assume that this person isn't going to be a "serious" user on my card, and may just be collecting CL and/or sign-up bonuses.

 

No idea if any issuer really goes through this thought process!


I'm sure some do on manual review.

 

I'm not a credit analyst, but it doesn't seem too difficult to reach some conclusions from a quick glance a credit report.  It doesn't take any financial acumen to figure out that a person with $30K income, $100K CLs across several cards, and a monthly revolving balance of $150.00 isn't going to be profitable customer, for all the reasons you've stipulated.

 

At best, this person is only collecting sign up bonuses and accumlating CLs not to use, but for posterity's sake.  At worst, this has the looks of a potential bust out bankruptcy.

 

 

Senior Contributor
youngandcreditwrthy
Posts: 6,155
Registered: ‎08-16-2012
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Re: "Too much available credit"?...Just didn't sound right...

Pay your cc bills and manage your debt effectively is all you need to do!

Luckily, I have no mortgage or auto loans! Lol That would def mess up my dti!
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TJDgator
Posts: 20
Registered: ‎12-10-2012
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Re: "Too much available credit"?...Just didn't sound right...

I think at the end of the day most creditors want to see a good payment history & no negatives reguardless of how much credit someone may have. Whether you have $500 total credit or $50,000 if you haven't shown you can handle what ya got then no sense giving you more credit. Just my 2 cents

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bs6054
Posts: 1,673
Registered: ‎11-11-2012
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Re: "Too much available credit"?...Just didn't sound right...


TJDgator wrote:

I think at the end of the day most creditors want to see a good payment history & no negatives reguardless of how much credit someone may have. Whether you have $500 total credit or $50,000 if you haven't shown you can handle what ya got then no sense giving you more credit. Just my 2 cents


Right, but that's part of "Will I lose money on this user"   There is also, as mentioned above "Is this user going to be profitable for me".

Valued Contributor
ryanbush
Posts: 1,294
Registered: ‎08-19-2012
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Re: "Too much available credit"?...Just didn't sound right...


TJDgator wrote:

I think at the end of the day most creditors want to see a good payment history & no negatives reguardless of how much credit someone may have. Whether you have $500 total credit or $50,000 if you haven't shown you can handle what ya got then no sense giving you more credit. Just my 2 cents


EXCELLENT POST! 

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Open123
Posts: 4,089
Registered: ‎02-23-2011
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Re: "Too much available credit"?...Just didn't sound right...

Let's pretend we're starting a Credit Card Company, what should be the jist of our "mission" statement?  Help people?  Be nice to them?  Make them feel good?  Raise their Fico Scores?  Help them with Rebuilding?

 

Whatever our purpose is, it is to make a profit.  If helping people rebuild is makes us money, then we'll do that, such as First Premier.  If we can sell a brand image with good rewards, then we'll do that, such as Amex.  If we want to leverage our size with horizontal integration, we can do that, such as Chase, Citi, and BofA with deposit, credit, and brokerage accounts.

 

In each case, it is to turn a profit.

 

What does a long history of low usage, paid in full, and large never use CL indicate?  No interest to be made.  No transaction fees to be harnessed.  If this person insists on paper statements, now we're losing money.  If this person is a "pain in the a..." calling us ever week, then we're hemorraging money.  In the end, we have a user whom we will never make any money and have to constantly be at risk with his huge CLs (which he'll never use as demonstrated by his history) compromised with fraud in which we absorb the loss.

 

Anyone want to start building our new CC venture with that demographic?

Established Member
financekid
Posts: 15
Registered: ‎12-24-2012
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Re: "Too much available credit"?...Just didn't sound right...

I think creditors are in this mostly to make a profit so I think profit is just as important as the risk factor, there was thread a few days/ weeks ago where a gentlemen was denied a Citi cc and yet he has 200k in available credit from other lenders all with 0 balances.
Probably Citi figured how much more does he need & how often will he probably use our card, so was that maybe too much credit available???
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Current Scores: FICOs EQ 698 TU 708 (7/13)
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In wallet:CAP1 (Closed)/BOA CASH (5k)/DISCOVER (5.5k)/CHASE FREEDOM (3k)/BARCLAYS (3.3k)/AMEX BCE(1k)
Future wallet: Citi,
Senior Contributor
Open123
Posts: 4,089
Registered: ‎02-23-2011
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Re: "Too much available credit"?...Just didn't sound right...


financekid wrote:
I think creditors are in this mostly to make a profit so I think profit is just as important as the risk factor, there was thread a few days/ weeks ago where a gentlemen was denied a Citi cc and yet he has 200k in available credit from other lenders all with 0 balances.
Probably Citi figured how much more does he need & how often will he probably use our card, so was that maybe too much credit available???

If you were in the business of *extending* credit, would you want a customer with "0" balances (on the surface) across a range of cards with $200K CL?  I'd assume as a "creditor," you'd prefer customers to actually...er...use your product, right?


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