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Possible reason for Cap 1 CLD

New Contributor

Possible reason for Cap 1 CLD

From Bloomberg

 

Surprise Surge in Card Defaults Sinks Capital One, Discover

 

Capital One’s provisions for losses in the credit-card unit, the firm’s biggest business, jumped 29 percent to $1.7 billion in the first quarter from the preceding three-month period, the McLean, Virginia-based company said Tuesday in a statement. The write-off rate rose to 5.02 percent, the highest in almost six years.

 

 

So I guess it isn't surprising that they cut some large lines that were not being used. They have to make adjustments when necessary. Also not a good sign for the economy if the trend continues. Definitly a good idea to plan out your credit exposure and have a plan for a downturn in the economy and tightening of credit.

8 REPLIES
Community Leader
Super Contributor

Re: Possible reason for Cap 1 CLD

I saw this as well and a possible reason.. Doesn't explain really why some have been hit by the CLD and some haven't as some of those not hit have very high CL's with fairly small usage along with not perfect credit profiles.  Whether there is more rounds coming, it is anyone guess, I hope not.  I look as it I shed 35k in credit when I closed my card out after then CLD me to open it up for bigger and better lendersSmiley Happy.. I use to think they were rock solid, but obviously this isn't the case and if a company is having huge losses from defaults then they are certainly going to re-evaluate their UW/portfolio and make adjustments to limit their risks.

 

Their more lenient lending practices and limits can be coming back to byte them as people possibly got over their heads or whatever the case might of been causing higher write-off rates.

Chase | Citibank | Amex | BofA | PenFed | NFCU | Discover | Barclay's| US Bank | Fifth Third Bank | FNBO
Super Contributor

Re: Possible reason for Cap 1 CLD

This whole Credit game isn't supposed to have rhyme or reason to it. 🙂
EX FICO  16 INQ  791
EQ FICO  10 INQ  786
TU FICO  12 INQ  790
Total CL$477,00038 TL
Community Leader
Senior Contributor

Re: Possible reason for Cap 1 CLD

Thanks for the information.
Gardening since xx/xx/xx Gardenversary xx/xx/xx Score: 08/21/17 EQ 781 TU 784 EXP 789
Current Score: 781
Goal Score: 800
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Moderator

Re: Possible reason for Cap 1 CLD


Nixon wrote:
This whole Credit game isn't supposed to have rhyme or reason to it. 🙂

Lies!

 

Er, wait a second...

 

Smiley Happy

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Established Contributor

Re: Possible reason for Cap 1 CLD

This corroborates the other article posted this week about increasing default rates worrying credit-card lenders. I wonder if the days of easy-as-pushing-the-button CLI's may not be coming to an end fairly soon. Also, the reason that Cap 1 is hitting some people with very high CL's/low util/less-than-perfect history and not others is almost surely due to their own internal algorithms and policies - they probably have a whole manual set up that they're not going to divulge to the outside public on who gets AA'ed and who doesn't in those circumstances.

 

 

Ch 7 BK discharged 12/14, well along in rebuilding credit. FICO 11/2/17:TU 660/EX 694/EQ 688 FICO 8 (Aug 2017) or 680 FICO 9 (Penfed Sep 2017), VS 3.0 11/7/17: TU 704/EX 690/EQ 697. $32.3K revolving credit as of 11/7/17; $951 Cap One secured Platinum MC, $2000 Apple FCU Platinum Visa,$3500 Amazon Prime Store Card, $3500 Walmart Store Card, $3500 Cap One Quicksilver MC, $3600 Discover It, $4000 Care Credit, $4300 Overstock Store Card, $7000 Penfed Power Cash Rewards Visa, $10k PenFed used car loan, $5k Navient student loan. In the garden again from 10/26/17 for at least the next 3 months unless I get a really really good preapproval.
Valued Contributor

Re: Possible reason for Cap 1 CLD


CreditCuriousity wrote:

I saw this as well and a possible reason.. Doesn't explain really why some have been hit by the CLD and some haven't as some of those not hit have very high CL's with fairly small usage along with not perfect credit profiles.  Whether there is more rounds coming, it is anyone guess, I hope not.  I look as it I shed 35k in credit when I closed my card out after then CLD me to open it up for bigger and better lendersSmiley Happy.. I use to think they were rock solid, but obviously this isn't the case and if a company is having huge losses from defaults then they are certainly going to re-evaluate their UW/portfolio and make adjustments to limit their risks.

 

Their more lenient lending practices and limits can be coming back to byte them as people possibly got over their heads or whatever the case might of been causing higher write-off rates.


I think the default rate increase has an indirect impact on the recent wave of CLD. They can use the credit lines from CLD and reallocate them into new accounts lines without using additional resources.

 

 

Super Contributor

Re: Possible reason for Cap 1 CLD

Interesting read. No cld from cap one. But Amex cut my lines. Hmm. Even gone for a while.

Established Contributor

Re: Possible reason for Cap 1 CLD

Not much of a surprise. The last few years, with the economy recovering from the crisis and borrowers getting back on their feet and credit worthy again, credit card usage has surged. Issuers have been very aggressive in gaining market share and new accounts during this phase, fully knowing they will have some default issues. They know that a good chunk of these new accounts will be with them for ages. It's part of the cycle.
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