CC Denied Because We're Not Up To The Eyeballs in Debt

[Clone]

When we built our new house several years ago, we opened a new credit card with Lowes. Lowes card gets a 5% discount, plus there was an additional 5% off your initial purchase. And, we had a coupon for some additional discounts because we had 'recently moved to the area'. All-in-all, a very serious discount on an entire house full of appliances. We had a call from the mortgage company asking about 'why do we see a new credit card with a huge purchase on it!'

I suspect that there is an element of fraud out there associated with acquiring and maxing out a massive amount of debt immediately before death. I saw a situation where a relative of a friend hooked up with a young lawyer of the opposite sex, they transfered a bunch of property around, hid some assets, and ran up some debt. After the death, the will is revealed. Recently revised by the new lawyer friend, most of the assets goes to the lawyer, a token amount to remaining previously estranged relatives. It appeared to be a pure money grab by the lawyer, but nobody really cared to get into it because a) there was very little legitimate wealth left, b) the will was written that if anybody contests it, they get cut out.

Seems like a tidy little scam. I would not be surprised if the deceased had maxxed out all the credit that they could obtain, to the benefit of the surviving lawyer.

 

[bada bing]

There are several undisclosed credit card issuer policies that don't make much sense, but are easy to tweak.

1. High existing limits generally are a big influence on getting high starting limits on new cards. Credit card companies seem to want to be seen as competitive *if* they issue a new card. High existing limits don't influence whether you get approved, or may even be a small factor against approval, but once approved are a major influence in what limit you are offered. Amex is one issuer that allows no-pull limit increase requests every 6 months. Over the course of a few years of good history, it is easy and almost automatic to rachet the limit on an Amex card up to ~$50K, if you ask for increases every 6 months. Beyond ~$50K they tend to request a financial review including releasing your tax records. I have a $50K limit on my Amex blue cash, which only averages ~$700 per month usage.

2. It is useful to have a rather high maximum balance reported on at least one active card. It is easy to do this by bunching planned purchases so they all report on the same month. You only need do this once and your credit report will remember the highest balance ever reported. I have a maximum balance reported on my Alaska Air Visa of $28K from purchasing a subaru with it 10 years ago. I paid it off before any interest accrued and that card averages ~$500 a month usage today but carries a $50K limit. A credit card company salivates over the thought of an application from a new customer who has a perfect payment history in their credit report and also shows high balances in the past. On initial report pull they have no idea whether you have ever paid interest or what balances you typically run. They only know the maximum reported.

3. Credit card companies categorize their customers as either transactors or revolvers based on their payment behaviors and treat them very differently based on the label. Both are valued customers but are managed differently. Transactors are those that have a history of never paying interest (they pay in full each cycle). Transactors tend to be given less oversight and see less apparent shepherding over their limits and purchase approvals. Revolvers have a lot more oversight and more human intervention in things like credit limit increases. The behavior of credit card companies can seem a lot more arbitrary and fickle if they have you categorized as a revolver. They re-evaluate your category frequently, so if you have done something to get yourself categorized as a revolver they have to see consistent transactor behavior for a while to bump your category back. The easiest way to achieve and hold a transactor categorization is to sign up for autopay of the full monthly balance every month.

4. The FICO8 algorithm has never been officially released, but what is in it has been worked out in great detail over years of observation. It is pretty easy to optimize an extra 30-50 points in a fairly short time. A rough outline is to have at least 3 active credit card accounts and have all but one reporting a 0 balance and one reporting a very small but non zero balance. Zero reported balances on all cards is a big point demerit, which doesn't make sense, but it is what it is. Another thing that doesn't make sense is that lack of an active installment loan is a big demerit. It you don't have an active mortgage or car loan it is easy to spoof an active installment loan by opening a shared secured loan at a local credit union.

 

[CRLLS]

Next thing they will be denying cards to people who pay them off every month? I guess as long as they can earn retail exchange they make something. We regularly get “pre approved” CC offers to our address in Arizona. As soon as they find out we don’t have a SS number the approval evaporates.

I don't feel bad for them at all. Consider that they might take 2-3% on each sales transaction. I figure if we pay off that bill on average every 30 days. That means they make >30% (365/30*2.5%) annual rate on their investment. That assumes that the CC company pays the retailer at the time of transaction. If they hold/delay, then they make a lot more.I honestly don't know how quickly they pay the retailers. Compare to a retail situation, that is 12 inventory turns per year. They aren't gonna go out of business very soon. I wish I could make that kind of return on my investments.

That is for those of us who pay the balance off every month. If I'm right, that is higher than what they earn from the poor guy who carries a balance and makes minimum payments every month.

Maybe my math is off but it sure seems sound to me.