topic Re: Why do banks decline people for credit cards that have bankruptcy? in Credit Cards

Why do banks decline people for credit cards that have bankruptcy?

mikey4833 — Mon, 15 Apr 2013 05:18:39 GMT

My question is why does banks decline people for bankruptcy? I mean its like you cannot refile but every 8 or 10 years... When your like 4-5 years in they are protected from bankruptcy... Really theyt are missing out on a very profitable market... I'm so tired of being declined for bk I'm going to start a credit card blog website. I used to have a retail self defense products website so I know how to get it up in the search engines. I'm going to write about different things like this and start petitions and send them to the president and Financial bureau of financial protection. If we all do our part maybe we can change somethings. I believe its credit descrimination in my book. Many people agree with me, I'm not speaking for the people who purposely run up cards and file for bk. I'm speaking for the working people who had a problem like I did my business went under. Chase understood me even after I stuck them with 27k. American Express is too hard too get. Those charge cards are pay in full they shouldn't be so hard to get... I have so many inquiries on my credit I just want a decent card not trash with 25% APR. Yeah I have a $4,000 limit Sears Platinum MC but 25.9% apr and no balance transfer offers at all and 4 capital one cards and 1 chase and several store cards. If I get approved for Citi Simplicity I will be happy their president's office is reconsidering my app from March. A very nice woman called me from their office.. I tried to have my amex app reconsidered before and I got a response back that not even a supervisor could overide their tough criteria. Discover won't approve me either even for they're smallest $500 minimum limit just due to BK but others get the card with BK not me though. They said they accept people with bk but they cannot tell me when their cut off time is and he said their criteria changes every day.. I said 4 years is the basic cut off time with Citi I got a Sears Card from them and I filed 30k bk on Citi business and a sears card and they still approved me but all my others cards are 1k lines about. I want to re-start my business and I have only a $750 limit cap 1. I need a decent card for business but because of BK that is a no can do...My fico scores are decent but vantage score says I'm 815 good. Credit scores don't matter in reconsideration. I cannot even get a $500 limit highest apr possible discover it card. That makes me feel like getting out of the credit card world people like me work so hard to rebuild their credit but get black listed by banks like Amex, Bofa and Discover.

Re: Why do banks decline people for credit cards that have bankruptcy?

Anonymous — Mon, 15 Apr 2013 05:26:38 GMT

It;s not great, but I think you partially answered the question yourself:

I'm not speaking for the people who purposely run up cards and file for bk.

How does the system distinguish (in a not very detailed app) between "bad" bk like that and "not my fault" bk on the other? And most people, even those purposely running up their cards might have not intended to be bankrupt (e.g. using the funds to make a killing and pay it all back).

Scores etc are there for a lender to estimate risk of default. And those who have had trouble in the past are statistically more likely to default again. (And maybe with a finer classification we can do better at distinguishing those at greater risk from those that aren't, but maybe not, and it's too much work). And yes, you can't file again for a period, but if you have no assets and owe the lender $30K, that you cannot file doesn't really help, at least in the short term.

Re: Why do banks decline people for credit cards that have bankruptcy?

mikey4833 — Mon, 15 Apr 2013 06:00:44 GMT

@Anonymous wrote:
It;s not great, but I think you partially answered the question yourself:

I'm not speaking for the people who purposely run up cards and file for bk.

How does the system distinguish (in a not very detailed app) between "bad" bk like that and "not my fault" bk on the other? And most people, even those purposely running up their cards might have not intended to be bankrupt (e.g. using the funds to make a killing and pay it all back).

Scores etc are there for a lender to estimate risk of default. And those who have had trouble in the past are statistically more likely to default again. (And maybe with a finer classification we can do better at distinguishing those at greater risk from those that aren't, but maybe not, and it's too much work). And yes, you can't file again for a period, but if you have no assets and owe the lender $30K, that you cannot file doesn't really help, at least in the short term.

Nice credit garden you got. btw. I had cards like you before. My business went under and it was a sole proprietorship. So personal liability. I couldn't keep whom I wanted out like Chase and Capital One and Bank of America. I wish they would put in a cut off time where they cannot use bankruptcy against you unless you filed on them in the past... I'm going to be gardening no more apps till next year I gotta let my inquiries age a bit and my credit as well. I thank banks like Chase who at least took a chance on me and gave me a $700 Slate card when I filed BK on them $27 they were stuck with. I get $44k a year and because of my credit I cannot get any decent business card only Capital One Spark Classic or real garbage card like former Cross Country Bank Applied Bank Business Visa card. Capital One has guidelines on credit levels like 5 year cut off for baddies.

Re: Why do banks decline people for credit cards that have bankruptcy?

SnackTrader — Mon, 15 Apr 2013 10:49:38 GMT

To be honest, before you start a blog on financial literacy or whatnot, it would be my suggestion to brush up on a few terms.

There is no "Financial Bureau of Financial Protection". So anyone going to your website would lose faith in your advice pretty quickly. You lost me the minute you used that term as opposed to the real term Consumer Financial Protection Bureau.

I wish you luck in your post-BK endeavors. But I believe you are holding yourself back with all of your inquiries and that you need to just chill out with what you have for 12 months. I bet you will find that BK will hold you back much less with fewer inquiries.

Re: Why do banks decline people for credit cards that have bankruptcy?

SnowBowl — Mon, 15 Apr 2013 10:53:50 GMT

@SnackTrader wrote:
To be honest, before you start a blog on financial literacy or whatnot, it would be my suggestion to brush up on a few terms.

There is no "Financial Bureau of Financial Protection". So anyone going to your website would lose faith in your advice pretty quickly. You lost me the minute you used that term as opposed to the real term Consumer Financial Protection Bureau.

I wish you luck in your post-BK endeavors. But I believe you are holding yourself back with all of your inquiries and that you need to just chill out with what you have for 12 months. I bet you will find that BK will hold you back much less with fewer inquiries.

+1!! This is how I got my Discover Card there was simply no INQ's when they pulled EQ... plus I gave a huge space when I got accounts approved such as HSBC Orchards, etc in 2008 I decided to garden for awhile..

Re: Why do banks decline people for credit cards that have bankruptcy?

CreditScholar — Mon, 15 Apr 2013 11:17:51 GMT

Sounds like sour grapes to me. I would expect someone who runs a business to have a better understanding of financial risk. Perhaps this is part of why it went bankrupt.

Re: Why do banks decline people for credit cards that have bankruptcy?

LS2982 — Mon, 15 Apr 2013 11:20:52 GMT

@Anonymous wrote:
It;s not great, but I think you partially answered the question yourself:

I'm not speaking for the people who purposely run up cards and file for bk.

How does the system distinguish (in a not very detailed app) between "bad" bk like that and "not my fault" bk on the other? And most people, even those purposely running up their cards might have not intended to be bankrupt (e.g. using the funds to make a killing and pay it all back).

Scores etc are there for a lender to estimate risk of default. And those who have had trouble in the past are statistically more likely to default again. (And maybe with a finer classification we can do better at distinguishing those at greater risk from those that aren't, but maybe not, and it's too much work). And yes, you can't file again for a period, but if you have no assets and owe the lender $30K, that you cannot file doesn't really help, at least in the short term.

There is no "not my fault" BK. Whatever your past was that created the BK the individual filing was responsible for it. I personally don't believe in BK's. If you file it, you should be made to pay every penny of it back in payments.

Re: Why do banks decline people for credit cards that have bankruptcy?

CreditScholar — Mon, 15 Apr 2013 11:31:20 GMT

Since I can't quote on this, LS is spot-on. Lenders don't care why you went bankrupt. The only thing that matters is that they lent you money, they didn't get it all back, and therefore they're well within their rights to not want to lend to you again.

Re: Why do banks decline people for credit cards that have bankruptcy?

Anonymous — Mon, 15 Apr 2013 11:56:13 GMT

To OP: you are labelled as high risk for a valid reason. Lenders lent you money and you burned them in return. There's no discrimination going on. This argument isn't going to fly in any court or anywhere. There are already lenders willing to work with you. You can't and shouldnt complain at all. This country already has ones of the most relaxed laws with regards to bankruptcy.

Let your inquiries fall off, and slowly build up your credit history, like what others are doing. It's a tough process. its meant to be this way and there's no way around it.

Sometimes you can't have your cake and eat it too.

Re: Why do banks decline people for credit cards that have bankruptcy?

Anonymous — Mon, 15 Apr 2013 12:14:46 GMT

@CreditScholar wrote:
Since I can't quote on this, LS is spot-on. Lenders don't care why you went bankrupt. The only thing that matters is that they lent you money, they didn't get it all back, and therefore they're well within their rights to not want to lend to you again.

While I agree that lenders don't care why you went bankrupt, I think there ARE some (nearly) "not my fault" bankrupcies. If you lost your job (which is hardly culpable in the recent recession) and then get hit for medical bills for treatment of something deemed a pre-existing condition (and thus not covered often pre Obamacare), that can easily wipe out any savings that the person had. It's not clear what such a person should have done differently. Without a 1/10th decent healthcare insurance/cost containment infrastructure, this is always a possibility.

Re: Why do banks decline people for credit cards that have bankruptcy?

Anonymous — Mon, 15 Apr 2013 12:19:47 GMT

Oh mikey! I so feel your pain but it takes time. Debtors used to be thrown in BK prisons a long time ago so the consequences of BK are meant to hurt.

The timeline for filing another BK is as follows:

2nd BK 7, must be 5 years from the first BK filing.

2nd BK 13, must be filed at least 2 years from the filing date of a 7 and 5 years from the filing date of a previous 13..

So the timeline is much shorter for filing a second BK.

I filed twice for two different reasons, both of which, were not due to purposely running up debt. I have been waiting a long time as well...8 years from the second BK and almost 10 years from the first BK. During my earlier waiting years, I did not focus on it...as doing that made it worse. I paid cash only, checked my credit infrequently, and focused on my family and my job.

It is virtually impossible to distinguish good BKs from bad BKs. Plus the whole intent of BK is to punish those so that they think long and hard about getting into it again. I know it must be tough not being able to restart your business again. But unfortunately, that is the way it is. At least we don't go to prison anymore, right?

Banks have been stripped of many of their rights to reclaim the monies owed to them after a BK is filed. When you file a BK 7 or 13, unsecured creditors are paid last and only if there is another left in your estate to pay them. This rarely happens so Banks lose a lot of money from BK filings. Take for instance a house or a car loan...you can get both shortly after BK BECAUSE the loans are secured by assets and Banks can use those assets to recoup some of the money lost. The less creditworthy pay higher interest for credit so that Banks can use those extra funds to recoup the remaining lost due to another customer's BK or default. Just as you come up with ways to keep your business from folding...Creditors use the higher interest paid to keep the bank afloat and they are choosy about the new customers they accept to manage risk so that the banks don't go under. No one, especially the government, want to see banks they are too big to fail, fail again, as everyone in the country has to bail them out and it damages our economy (banks stop lending, people lose their jobs, and if the Feds don't intervene, people lose their monetary assets invested in the bank) and it puts innocent citizens in the crossfire. The housing market crash was due to subprime mortgage lending. So the stricter lending requirements protect everyone.

Unsecured cards are granted without an asset. So if you default, the banks lose. With mortgages and cars, if you default, the Bank gets your car and/or your house. However, as we learned from the housing market crash, the houses nor higher interest rates are enough to offset the losses from a massive amount of people going into foreclosure as the losses due to short sales and decreasing property values offset the benefit of the assets the money was loaned against. If the same thing happened to the credit card industry, the losses would be massive due to the lack of security. Banks have learned the hard way through the housing market crash that the subprime industry is very risky with dire consequences if that risk becomes reality. So much so that taking the risk for a higher return is not worth it. So mortgages are harder obtain now and more expensive (if backed by FHA as PMI has increased to replenish the lost of funds the Feds gave to the banks for foreclosures) then they were before the crash.

In order for the laws to change, Banks will request the right to a higher priority to collect unsecured debt and that just isn't going to fly with Elizabeth Warren and others in the Congress and Senate. The only debts that are currently non-dischargable are student loans and taxes. Why? Because the government always gets first priority. They revamped the BK laws back in Oct 2005. I remember I was in a long line of people trying to file before the new laws went into effect because they changed the Ch 13 law to require that the full outstanding balance be repaid for auto loans versus the Kelley Blue Book value for the car. Additionally, they changed the wait period to file another Ch 7 from 2 years to 5 years. But Creditors didn't get what they lobbied for entirely. Banks/Creditors also wanted unsecured debt to have to be paid back in a Ch 13. Consumer Protection advocates argued that it would potentially make the Ch 13 payments too burdensome which would defeat the purpose of BK, which is a fresh start. What they did change was the time period between filing two Ch 7's and made the requirements tougher for filing a 7 so that it forces people that screw up again to file a Ch 13 and repay back some of the debts owed. But there is still a loophole. Consumers can rather easily convert to a 7 before the 13 plan is paid off, rendering more losses to the Banks. So the only way the laws will change that correspondingly lead to less strict underwriting requirements for unsecured debt is if the Banks are granted more power to collect a debt through BK and that just isn't going to happen because many will argue it defeats the purpose of filing a BK.

On another BK thread, I wrote a long post about my BKs and my timeline for rebuilding. You are doing a fantastic job rebuilding and are much farther along than I was 4 years after BK. if I remember correctly, you filed a 13 correct? If so, you have about 3 years to go before doors with prime lenders really start to open for you as that is when you will be BK free. You accomplished the impossible with Chase as they are known to blacklist those who filed BK on them. And they lost an enormous amount of money through the collapse of your business so I would be very grateful that you got back in the door with Chase.

Do you have a 401K or other type of retirement account? If yes, have you considered borrowing against your 401K to restart your business now? In 3 years, you will be able to get back in with prime lenders and you can use the credit extended to further expand your business.

Re: Why do banks decline people for credit cards that have bankruptcy?

Anonymous — Mon, 15 Apr 2013 12:24:58 GMT

While I fully rspect LS's opinion I have to disagree that BK is always the filers fault.

I was a passenger in a vehicle that was hit by a semi truck going over 60 MPH back in 2003. The collision killed my friend and left me in the hospital for over 3 months.

Trucking company and driver both filed bankruptcy and had no insurance.

I lost my job from being in the Hospital and even with Charity and other help still owed over $160,000 in medical bills plus rehab.

It was stacks of letters with threats to sue along with daily phone calls.

It was almost another year before I was able to work again but there was no way I was ever going to get out from under those bills so I filed bankruptcy.

I paid for that for over 7 years of my life and still have reaged accounts show up from time to time.

Medical bills should not be alowed to be listed on credit reports. This is of course only my opinion.

So I do believe in limited circumstances BK may be the only choice.

Re: Why do banks decline people for credit cards that have bankruptcy?

Anonymous — Mon, 15 Apr 2013 12:29:43 GMT

And when lenders ask why you filed BK when going through the recon process, anyone can lie and say it was due to a medical issue, job loss, or the death of a spouse. There is no way a bank can verify your statements as the reason you filed is not recorded. So banks make you wait almost a decade for prime cards because they hope that whatever the reason was for filing, that you recovered financially and know how to successfully manage credit.

Re: Why do banks decline people for credit cards that have bankruptcy?

parakleet — Mon, 15 Apr 2013 12:48:01 GMT

@Anonymous wrote:
While I fully rspect LS's opinion I have to disagree that BK is always the filers fault.

I was a passenger in a vehicle that was hit by a semi truck going over 60 MPH back in 2003. The collision killed my friend and left me in the hospital for over 3 months.

Trucking company and driver both filed bankruptcy and had no insurance.

I lost my job from being in the Hospital and even with Charity and other help still owed over $160,000 in medical bills plus rehab.

It was stacks of letters with threats to sue along with daily phone calls.

It was almost another year before I was able to work again but there was no way I was ever going to get out from under those bills so I filed bankruptcy.

I paid for that for over 7 years of my life and still have reaged accounts show up from time to time.

Medical bills should not be alowed to be listed on credit reports. This is of course only my opinion.

So I do believe in limited circumstances BK may be the only choice.

+1 I don't think you have to justify to others your reasons for your BK. Obviously BK isn't perfect but I think it's far more important what a person does who finds themselves in that situation.

To the OP: I wish you luck in your credit journey. I'm sure it can't be easy.

Re: Why do banks decline people for credit cards that have bankruptcy?

Open123 — Mon, 15 Apr 2013 13:53:55 GMT

In my view, BKs are sometimes unavoidable, especially for a person with little assets starting out on his career struck with a medical tragedy before having medical insurance. In this case, one can hardly "blame" the person from not being able to escape the burden of a $150K medical bill collecting compound interest and seeking legal recourse.

America's a land of 2nd chances. In my estimation, everyone should get a second chance.

Having said that, I also believe the Banks are well within their rights to "decline" on a BK alone. It's a numbers game, really. For instance, when I started out working, there were many who would say "the next derelict who walks in could be Sam Walton." While this is true, I place the odds at a 1 in 1000. It is far more efficient to assume that a "derelict is a derlict" and a "rich looking person is rich" rather than spending the time and effort to unearth the *one* eccentric derelict who is actually wealthy and the *one* affluent-looking person who is just a poser with borrowed stuff.

I would hardly expect a bank to do otherwise especially with the vast amount of applications they must handle daily. The one thing I've learned in business is that once people have learned an exception has been made, the flood gates open and everyone calls making up all sorts of reasons to receive the said exception.

This is why it is best to *never* make exceptions, however good the reasoning.

Re: Why do banks decline people for credit cards that have bankruptcy?

mirachi — Mon, 15 Apr 2013 14:08:02 GMT

Didn't you mention that you had a ton of inquiries on your reports? Including 10 or so new cc's? Even without the bankruptcy I'd say it'd be slighly more difficult to get a card in general...

Re: Why do banks decline people for credit cards that have bankruptcy?

b_seeker — Mon, 15 Apr 2013 14:16:27 GMT

I can't follow how many cards OP has. At one point I thought the OP said they had a single card(Cap1, $750) then I thought it said 10 cards. . .

OP: Did you burn AMEX for a large amount with your BK? If you did, you should probably stop wasting apps on them. Especially if they are cancelling your apps before pulling your reports. And not to be rude, but you might want to work on grammar before you start your blog.

Re: Why do banks decline people for credit cards that have bankruptcy?

Gunnar419 — Mon, 15 Apr 2013 14:27:43 GMT

@b_seeker wrote:
I can't follow how many cards OP has. At one point I thought the OP said they had a single card(Cap1, $750) then I thought it said 10 cards. . .

OP: Did you burn AMEX for a large amount with your BK? If you did, you should probably stop wasting apps on them. Especially if they are cancelling your apps before pulling your reports. And not to be rude, but you might want to work on grammar before you start your blog.

+1 OP you sound as if you're torpedoing yourself with excessive, incautious apping, then blaming everybody but the person responsible.

People DO re-establish credit shortly after bankruptcy. They do it all the time, as many, many success stories here show. They do it by carefully choosing what they app for and only apping for credit that's within their reach and slowly rebuilding. You seem to be demanding that full financial credibility be returned to you all at once as a gift. You can rant all you want, but that will never happen.

If you honestly think you have a case that's good enough to draw followers, you're going to have to present it a lot better than you presented it here. You need better logic, better grammar, and carefully assembled facts to support your argument.

Re: Why do banks decline people for credit cards that have bankruptcy?

Cdnewmanpac — Mon, 15 Apr 2013 14:38:04 GMT

1. while medical bankruptcy is now the most common reason individuals file, the op wasn't one of them. medical bankruptcy is a symptom of a broken healthcare system and the solution lies in addressing that system, not the credit market.
2. the statistics don't support the op's position. overwhelmingly, people who file bankruptcy once are hugely more likely than the general public to file bankruptcy again. that is why credit issuers decline you, not out of revenge. our current laws protect the op by removing his bk from his credit report after 10 years even though his lifetime risk of default is higher from having EVER filed bk.

Re: Why do banks decline people for credit cards that have bankruptcy?

mikey4833 — Mon, 15 Apr 2013 15:15:59 GMT

@b_seeker wrote:
I can't follow how many cards OP has. At one point I thought the OP said they had a single card(Cap1, $750) then I thought it said 10 cards. . .

OP: Did you burn AMEX for a large amount with your BK? If you did, you should probably stop wasting apps on them. Especially if they are cancelling your apps before pulling your reports. And not to be rude, but you might want to work on grammar before you start your blog.

Work on my grammar. lol I was on late last night could hardly keep my eyes open when I wrote all that I wrote alot of replies last night. Thanks for all the info guys. I agree with you too many credit inquiries is 1 issue. Chase said I have to establish more credit before any increases because of the huge amount they lost. To the one person who asked if I filed chapter 13 I filed 7. I don't have a 401k or anything. To get the answer correct I have 9 personal cards and 1 Capital One Spark Visa $750 limit.

This is my last ditch effort I am getting Citi to reconsider me for Simplicity card The I quit for this year. I have the following cards:

Sears Platinum MC $4k limit opened 01/2013

Cap 1 MC $1k opened 02/2011

Cap 1 Playstation Visa $1,250 opened 07/2012

HSBC/Cap 1 Discover $500 opened 12/2010

Chase Slate $700 opened Feb 2013

Then I have the following store cards:

Walmart: $1500

Amazon: $1100

Giant Eagle Gas Card $500

Paypal Smart Connect : $1093 (hooked up as back up to my debit card and earn 1% cash back) All these opened 03/2012

And 1 Cap 1 Visa Spark Business card - opened 03/2012

And to some of the rude persons who basically say people who file bankruptcy are at fault and they should have to pay it all back and insulting me for not knowing how to run a business let me tell you something. You don't know me or other peoples situations so please don't be rude on these forums ... And there is a bureau. The Consumer Bureau of Financial Protection who regulates credit. consumerfinance.gov they helped me with numerous things with credit bureaus. I just asked a question about why banks do this I did not come to get jumped on and make me feel like a piece of trash I never wanted to file bankruptcy.. I had a self defense products website it did well for 4 years then too much competition set in and I sold for a drop ship company out of North Carolina. I spent thousands on building the website and advertising and to keep all the customers happy I went bankrupt after the housing market crash My credit cards jacked my aprs all of them over 25% and I owed $80,000 in between personal and mostly business cards. If I had the money I would pay it back. I just paid back 2 charge offs that my wife opened after bankruptcy Swiss Colony behind my back and set me back $1000 and it made my credit score go up.

But the bottom line is you cannot weed of the bad bk from the good folks like you say. I will just wait a couple years before attempting anymore apps and definately not any more amex apps. I never filed bk on them I had one in 2008 and closed it out chase took the whole $16k balance and transfered it. So I do go something to look foward to in 2017 if 8 years is correct for amex accepting bk or it will be 2019. Seems like a long time but the way time flies I'll be there I just had a birthday last year in my 20's.