@Anonymous wrote: (turn your brain on here):
Capital One likes prime borrowers who still have subprime tier credit cards from years ago. Why? Because when they sell subprime debt (Class D) to investors, they want to keep the FICO score average a little higher, and the default rate a little lower. By keeping prime borrower in a subprime card, they can skew the analysis when investors ask. If it wasn't for these useless subprime cards being open (even for 2-3 extra months), truly bad credit borrowers may not even get that $200 credit limit because investors might be scared off from the group average delinquency and FICO score.
Capital One likely relies on some borrowers not wanting to close an old credit card even though they went from 550 FICO to 800 FICO since opening it. By keeping it open, it helps skew the results for the class D gutter subprime risk ratio so investors are more likely to invest in it.
This is also why Capital One gives second chances: because not only do they have investors who want a piece of profitable-but-risky subprime debt, but they have prime credit borrowers who still retain subprime cards to help the pool look better overall.
More to come as I have time to write it.
Omgosh! I have read, re-read....I needed this. Thank you!
My Take Home Pay Don't Take Me Home
