Are Credit Searches Unfair

RobertoMoir

michael1983l wrote: »

What is wrong is your assumption that banks choose the current system on searches to make their decisions better wheras I am suggest it is like that because it is convenient to help keep the lending rates uncompetative. That is a benifit to all banks that are in lending which is why they have stuck with it.

A person should not be discriminated against because they want to shop around, if my credit history was good and I didn't have a lot of outstanding debt then yes in theory I should get accepted for the loan I wanted, but in reality banks can lend to different profiles that they don't advertise and sometimes don't lend at all when the pot is dry so a perfectly good person could get rejected.

If the banks only marked on your credit file when an account was accepted as a trade then it would give the consumer the power to look at a different ammount of lenders, find out which ones want their buisness and then pick the best offer available.

There is no excuses because a bank can easily make an informed decision on how many accounts you have open, what your credit usage is, what your payment history is like and how much disposable income you have. If they can't make an informed decision off that info without resorting to how many searches a person has made then it is the banks who have got the problem not the consumer.

Well first of all, where I talk about them using the current system as a route to making better (or not!) decisions, that isn't just about what is best for you and I as customers. There's what's best for their business and there's what is cost effective and simple for them to operate and which can then be demonstrated to show no discrimination on any illegal grounds in the event of a stewards enquiry, so to speak. When you consider all of those issues a business faces then "better" takes on a slightly different shade.

Remember, they're in business to make a profit from helping people finance their lifestyle, not to help people get finance.

Do you not see how a history of many searches in a small space of time really could be an alarm bell to lenders for legitimate reasons? How would you tell the person "shopping around" apart from the person desperately trying to get credit from anywhere and everywhere they can because they're broke (and therefore a bad risk)?

As I said before, if you are right then where is the one maverick lender who, like a bad Hollywood action movie hero, doesn't "play by the rules" and makes money hand over fist doing it exactly how you say?

What you're proposing is currently happening is a cartel, and while they certainly exist, I'm sure the FSA would have something to say if current lending practices were fixed in the way you suggest, and it doesn't get around the fact that a new business would not be part of the cartel and would have an incentive not to join in order to mop up customers who are currently falling through the gaps in the current arrangement.

michael1983l

RobertoMoir wrote: »

Well first of all, where I talk about them using the current system as a route to making better (or not!) decisions, that isn't just about what is best for you and I as customers. There's what's best for their business and there's what is cost effective and simple for them to operate and which can then be demonstrated to show no discrimination on any illegal grounds in the event of a stewards enquiry, so to speak. When you consider all of those issues a business faces then "better" takes on a slightly different shade.

Remember, they're in business to make a profit from helping people finance their lifestyle, not to help people get finance.

Do you not see how a history of many searches in a small space of time really could be an alarm bell to lenders for legitimate reasons? How would you tell the person "shopping around" apart from the person desperately trying to get credit from anywhere and everywhere they can because they're broke (and therefore a bad risk)?

As I said before, if you are right then where is the one maverick lender who, like a bad Hollywood action movie hero, doesn't "play by the rules" and makes money hand over fist doing it exactly how you say?

What you're proposing is currently happening is a cartel, and while they certainly exist, I'm sure the FSA would have something to say if current lending practices were fixed in the way you suggest, and it doesn't get around the fact that a new business would not be part of the cartel and would have an incentive not to join in order to mop up customers who are currently falling through the gaps in the current arrangement.

Yes it might be of benafit to lenders but as consumers we should expect a better and fairer service. The reason it hasn't been changed is because all lenders have to adhere to the banking code set out. The code can be changed by the banks and the FSA but it would mean a majority decision so no not one maverick lender could break that rule.

As for the bit you discuss about searches, well searches mean nothing unless the account is taken up. We live in a modern world where these marks could realisitcally be placed on your credit file immidiatly, yes the banks should be concerned if a borrower is taking out lots of accounts in a short space of time but then again what relevance does 200 searches have in a month if only one offer is taken up.

DENMAN_3

I'd argue they are unfair in their present setup.My partner applied for the virgin 0% balance transfer card and was told that they would need further information before accepting.She got a phone call from them asking if she had an amazon card,(she got this after shopping on their site and applied for the 0% interest on items bought on their site which she got)and was told that both cards are thorough the bank of america and you cant have 2 different cards from the same bank so was declined.so thats a search that will show on her file for a card she had no chance of getting.

RobertoMoir

DENMAN wrote: »

I'd argue they are unfair in their present setup.My partner applied for the virgin 0% balance transfer card and was told that they would need further information before accepting.She got a phone call from them asking if she had an amazon card,(she got this after shopping on their site and applied for the 0% interest on items bought on their site which she got)and was told that both cards are thorough the bank of america and you cant have 2 different cards from the same bank so was declined.so thats a search that will show on her file for a card she had no chance of getting.

Yes, if that's the case (have you checked?) that's certainly dumb behaviour on their part. I think lenders shouldn't do anything that will show a trace on your credit record until you've passed whatever other internal checks they have.

RobertoMoir

michael1983l wrote: »

Yes it might be of benafit to lenders but as consumers we should expect a better and fairer service. The reason it hasn't been changed is because all lenders have to adhere to the banking code set out. The code can be changed by the banks and the FSA but it would mean a majority decision so no not one maverick lender could break that rule.

If this is mandated by the FSA then you have to ask why. Are we saying that they make random rules for fun, are they actually actually conspiring against bank customers somehow or is there possibly a good reason for this rule?

Incidentally, which rule? Where can I go to read it? I'm trying to learn here. A lot of people talk about irresponsible borrowing on here, and then go on to discuss irresponsible lending. Perhaps its related to that?

michael1983l wrote: »

As for the bit you discuss about searches, well searches mean nothing unless the account is taken up. We live in a modern world where these marks could realisitcally be placed on your credit file immidiatly, yes the banks should be concerned if a borrower is taking out lots of accounts in a short space of time but then again what relevance does 200 searches have in a month if only one offer is taken up.

Again:

Do you not see how a history of many searches in a small space of time really could be an alarm bell to lenders for legitimate reasons?

Of course lots of searches could be relevant. If you look around the credit card boards, the loan boards and the debt free wannabe boards here you will see countless threads over time from people who have borrowed too much and are desperately applying for loans and credit cards left right and centre rather than face up to their problems.

Would you lend to those people? You'd be doing them no favour in the long run and you'd stand a high chance of losing some or all of your money.

I'd also agree that lots of searches could mean that someone is innocently shopping around. But how are lenders supposed to tell?

Again:

How would you tell the person "shopping around" apart from the person desperately trying to get credit from anywhere and everywhere they can because they're broke (and therefore a bad risk)?

This brings me back to the idea that the current system, flawed as it might be, is in place not because it's "fair" (I agree that it isn't, remember?) but because the alternatives suck even more.

If you removed the ability of lenders to look at lending patterns and draw conclusions from them you would be increasing the risk to them of losing loaned money. This would mean that the charge for credit would increase to offset this risk, and it would become much more difficult to obtain credit.

michael1983l

RobertoMoir wrote: »

If this is mandated by the FSA then you have to ask why. Are we saying that they make random rules for fun, are they actually actually conspiring against bank customers somehow or is there possibly a good reason for this rule?

Incidentally, which rule? Where can I go to read it? I'm trying to learn here. A lot of people talk about irresponsible borrowing on here, and then go on to discuss irresponsible lending. Perhaps its related to that?



Again:

Do you not see how a history of many searches in a small space of time really could be an alarm bell to lenders for legitimate reasons?

Of course lots of searches could be relevant. If you look around the credit card boards, the loan boards and the debt free wannabe boards here you will see countless threads over time from people who have borrowed too much and are desperately applying for loans and credit cards left right and centre rather than face up to their problems.

Would you lend to those people? You'd be doing them no favour in the long run and you'd stand a high chance of losing some or all of your money.

I'd also agree that lots of searches could mean that someone is innocently shopping around. But how are lenders supposed to tell?

Again:

How would you tell the person "shopping around" apart from the person desperately trying to get credit from anywhere and everywhere they can because they're broke (and therefore a bad risk)?

This brings me back to the idea that the current system, flawed as it might be, is in place not because it's "fair" (I agree that it isn't, remember?) but because the alternatives suck even more.

If you removed the ability of lenders to look at lending patterns and draw conclusions from them you would be increasing the risk to them of losing loaned money. This would mean that the charge for credit would increase to offset this risk, and it would become much more difficult to obtain credit.

I am sorry but you just don't get it do you, let me explain again. I will answer the one question you seem to not be grasping what I mean on.


I'd also agree that lots of searches could mean that someone is innocently shopping around. But how are lenders supposed to tell?

There is no excuses because a bank can easily make an informed decision on how many accounts you have open, what your credit usage is, what your payment history is like and how much disposable income you have. If they can't make an informed decision off that info without resorting to how many searches a person has made then it is the banks who have got the problem not the consumer.

michael1983l

It is easy to tell if somebody is desperate for credit, I could tell you everytime without looking at how many searches they made.

First indicator whats the Borrowing available against the ammount borrowed - lenders usually like you to not be using anymore than 75% of your available credit at any one time.

Second Indicator is how many credit accounts the currently have, are they all up to date and had more than the minimum payment paid off each month and is there any history of late payments/ccj's/defaults

Third indicator is how much disposable income they have, if there is not enough to pay the credit comfortably then simple don't lend.


I suspect I could personally correctly decide by the end of step one in 50% of cases

by the end of step two in 25% more of the cases

and by step 3 100%.

It isn't hard REALLY.

tripled

I don't agree that searches should not show on reports, but I think there could be a better system. When someone applies for credit, the search should go on the file and stay there whilst the application is processed. If credit is refused or someone turns down an offer, then the searches should disappear within 7 days of the decision. If someone accepts the offer of credit, or they don't confirm with the lender, then the search stays on the file as it does now.

michael1983l

tripled wrote: »

I don't agree that searches should not show on reports, but I think there could be a better system. When someone applies for credit, the search should go on the file and stay there whilst the application is processed. If credit is refused or someone turns down an offer, then the searches should disappear within 7 days of the decision. If someone accepts the offer of credit, or they don't confirm with the lender, then the search stays on the file as it does now.

Thats not a bad comprimise.

RobertoMoir

michael1983l wrote: »

I am sorry but you just don't get it do you

I "get it" perfectly well. I just disagree with you and still don't think you've done much to address the points I've made. Not that you have to, of course, but I still think those questions need to be answered properly by anyone seriously considering a change to the current system.