Denials Should Be Soft Pulls

[indiolatino61]

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@Tdatb64 wrote:

I think I would rather see a mandate that all issuers utilize a system like AMEX's, where you see if you're approved and the terms (SL & APR, at least) before you decide to accept or decline. The issuer then gets the option to do a hard pull if you accept the offer but no option to do so if you decline.

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Excellent point...this would indeed be ideal for all involved. If anyone knows why this is not the norm, please let us know. If AmEx can do it, so can they all.

[Patient957]

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@Tdatb64 wrote:

I think I would rather see a mandate that all issuers utilize a system like AMEX's, where you see if you're approved and the terms (SL & APR, at least) before you decide to accept or decline. The issuer then gets the option to do a hard pull if you accept the offer but no option to do so if you decline.

We'd all rather have that, or least 99% of us.  But at the same time, I fully understand why it ain't gonna happen.

[dfwxjer]

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@Varsity_Lu wrote:

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@dfwxjer wrote:

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@Varsity_Lu wrote:

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@dfwxjer wrote:

Denials should absolutely remain as HPs. Credit seeking is a huge red flag and indicator of deteriorating finances. 

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It's not that black and white. I am seeking a couple of new cards not because my finances are deteriorating but rather because I want more cash back. Fidelity 2% > Quicksilver 1.5%, Max Cash 5% > Voice 3.15%.

By your logic everyone should only have one card: the very first card they ever started with.

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There's no fallacy with the logic and that's quite a jump in your logic.

Why should a denial be treated any different than an approval? 

You're mixing up the normal process of obtaining credit with what lenders consider to be credit seeking. Opening a couple new accounts is not the same as credit seeking. Lenders look for the LOL/24 borrowers, not the people that are obtaining credit at a normal velocity. Not to mention, I'm assuming you received approvals for those accounts so your example has nothing to do with denials remaining as HPs. 

The reason denials should remain as HPs is so lenders can see if a borrower went on a mega app spree. Borrowers don't get to dictate that HPs only count if they're in their favor. 

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Look, I agree with you on HPs, and excessive HPs are definitely a red flag. I just think you need to be careful implying people who seek new credit have deteriorating finances. That's isn't always true. When you define credit seeking the way you want, your argument makes sense. However, the definition of credit seeking is not consistent from lender to lender. US Bank, for instance, won't usually approve anyone with even a single recent inquiry. That may be considered normal process for other banks, but it's credit seeking for USB. There was a thread a while ago about this very thing:

Credit Seeking Definition 

The problem is that what is credit seeking to you may be normal to me. And people with good finances still seek credit.

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Gotcha. Yeah, I use the term "credit seeking" in the negative sense where people are mass applying for credit. 1 or 2 inquiries is absolutely normal, and agree that even more isn't the worst in the world. I know my inquiries are what keep my score from being an 850 but I don't really care because the few points I get docked don't overshadow the benefit I get from a new card every once in a while. Anytime my score gets in the 820+ range it seems I decide to revamp my card strategy and then I'm back to 800ish lol. 

Either way, the OP referenced denials not counting so neither of our behavior are what's being discussed here since we get approved when applying for things. 

I feel every credit app should show up on the bureaus so lenders can get a full picture of what they're working with, even when the HP results in a decline. Normal people applying for credit won't be seriously affected, and the only time inquiries are a serious issue on a report is when they're numerous in a short period of time. 

[hdporter]

Is this thread really still a thing?

[indiolatino61]

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@hdporter wrote:

Is this thread really still a thing?

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[Pppoolboy]

I find it interesting when people talk of "shoulds."  Hard pulls are there for lenders to tell each other that a person is "seeking credit."

Of course this concept largely predates the era of "credit card rewards."  Back in the day, there were no rewards (or the rewards were minuscule) and the only reason people applied for credit cards was for the actual credit.  I remember I had a Discover Card that gave out a range of cash back from a quarter percent up to one percent based upon monthly spend. And that was considered craaaazy.

These days many people, such as myself, aren't so much "seeking credit" as we are "seeking rewards" and the old/outdated algorithms hurt us because they don't take account of that.

Doubt it'll change any time soon.

[Thomas_Thumb]

Big data shows seeking credit correlates to a higher risk of default regardless of outcome. There are additional penalties for new accounts. Leave account seeking HPs alone.

On the other hand ... I'd support all CLI requests being treated the same - meaning SP regardless of how initiated or outcome. Just put hard limits by account on request frequency to curtail the squeaky wheel syndrome.

[CreditPoor]

HP's should remain, however there should be rules that limit HP's for just that seeking credit. Cut out all the reckless HPs for opening bank accounts unless you're looking to apply for a credit card at that time. Additionally, thry should penalize lenders like car dealerships that shotgun credit unbeknownst to the borrower. Finally, SPs for credit limit increases because a bank can see all they need to with your spending habits and SP review of your credit.

[FICOdawg]

This is another example of Fico penalizing what can be prudent fiscal responsibility such as shopping for the best rate.

One of the banks I'm looking at for my boat loan offers an unsecured loan meaning they let you get title to the boat.    However, they only advertise best rate (requires 800+) and you have to formally apply to know what rate you'll get.        

There should be a way for FiCO to know its rate shipping and not random credit seeking.

If you are low 800s and try to shop the rate a few HPs could cost you easily another 80/month in payment if you get knocked under 800 for your score.    Assinine.

[indiolatino61]

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@Pppoolboy wrote:

I find it interesting when people talk of "shoulds."  Hard pulls are there for lenders to tell each other that a person is "seeking credit."

Of course this concept largely predates the era of "credit card rewards."  Back in the day, there were no rewards (or the rewards were minuscule) and the only reason people applied for credit cards was for the actual credit.  I remember I had a Discover Card that gave out a range of cash back from a quarter percent up to one percent based upon monthly spend. And that was considered craaaazy.

These days many people, such as myself, aren't so much "seeking credit" as we are "seeking rewards" and the old/outdated algorithms hurt us because they don't take account of that.

Doubt it'll change any time soon.

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This is an excellent point. I do not need any more credit and don't intend on applying for any in the near future. However, if a card with superb benefits that fits my needs comes along, I may apply for the SUB and the benefits even if I don't actually need any more actual credit.