Do Banks REALLY care about rating or just making money?

dw89

Hi All,

Here's a question I hope you may be able to help with as I'm dumbfounded with it all.

I, in my mid 30's, quite luckily have had a very good rating. Had lots of cards over the years, always been able to pay them off, never missed any kind of payment. Basically I have used cc's as a debit card only paying with them what I can spend. I have never had any kind of credit ever turned down, which I assumed to be because of this.

Recently my wife, who relies on me, applied for a particular (through the door) credit card. She has no income. She was approved straight away.

I did the same and was refused for the first time ever. They told me it was because another card was stated as being over the allowance. This was a mistake, which I proved and re-applied sending the info to prove it was a mistake. I was still turned down. Bearing in mind, which I pointed out to them, that I am employed, earn decent money and have spent (and paid off) over £50k on the cards this year I said that I could not understand how I would be a bad investment. Still turned down.

What am I missing? Or, in an age of money-grabbing banks, are they only interested in clients (i.e. they approve my wife who has no income and relies on me for money) who could possibly default on their credit and make the banks more money in the process? Am I being very cynical or is there any point to a good rating where you pay your dues and work hard? Secondly, if (for whatever reason) they turn down credit like this does it actually go against me and my rating now?

Interested in your views and experiences

DW89

immoral_angeluk

If you have a bad credit rating they probably won't offer you credit.
If you're not profitable they probably won't offer you credit.

I'd imagine the two things go hand in hand.

opinions4u

Maybe the company that declined you thinks your available lines of credit elsewhere are big enough and they don't have the appetite to add to it.

They don't want customers who think they will default because it increases the amount of capital they will set aside and also increases the risk of debts being written off.

YorkshireBoy

What was the APR and limit given to your wife?

Re your £50K, perhaps they're not happy that's all personal spending, ie maybe they're suspicious anyone spending that amount per annum is financing a business with credit cards?

dw89

All fair points, must say I hadn't thought that in depth really, I simply presumed that if the rating is good (which it is - I checked) and that they will make money from the purchases (say 3% on £50k is £2k profit for a few statement sheets) that they would give you a card. It doesn't add up for me that they would give someone who earns nothing a card and yet not one to me. Still, as said, I suppose one's word that you are honest and a good rating is not enough. If I had had bad experiences then I could easily understand the decision but, not knowing as they say, is always the worst!

Thanks all

Venusflytrap

immoral_angeluk wrote: »

If you're not profitable they probably won't offer you credit.

I read this so many times and don't think it's true. Just using a CC earners the issuer a percentage in merchant fees - profit. Paying off one's CC in full means reduced debt risk for them and the bank - again profitable either way.

I understand that someone who only struggles to pay the minimum or part of the debt is more profitable because they earn the bank compounded interest, but surely this is a greater debt risk to the bank and a potential -ve on their balance sheets?

Rewards/cash back CCs are definitely designed for customers who pay in full each month.

YorkshireBoy

dw89 wrote: »

I simply presumed that if the rating is good (which it is - I checked)

What Experian et al think of you is largely irrelevant, as you have now found out.

Don't buy any more ratings or scores from them.

dw89

To VenusFlyTrap: That;s what I thought. I have used cards purely to earn thousands of airmiles (Virgin and Airmiles) as well as cashbacks etc etc. I've never defaulted and, as said, my other card has made more than £2k out of me in the last 12 months (building a house hence large expenditure). My normal cc yearly bills have been around £12k per year, always paid off and have done so for over 16 years. Just seems very odd to me.

DW

opinions4u

say 3% on £50k is £2k profit for a few statement sheets

3% of £50k is 25% less than the figure you provide.

Your 3% isn't accurate. Typical merchant fees are 1.5% to 2.5%. So we've already halved your value to £1,000.

The word profit is also not accurate. Gross income would be more appropriate. There are several overheads that the card issuer has before transactional activitiy becomes profit. Not least cashback, points, miles or whatever for some people.

And don't forget that they've effectively provided you with £50k in interest free credit for a month. Which they could have lent to somebody else at 20%. Which is about £833.

So there's not much in it for them.

dw89

YorkshireBoy: Obviously, but if they're judging us on a criterion that seems to defy logic what does one do? Lets assume (as obviously you don't know me) that I am doing everything right and I am still turned down....if they're not judging you on Experian/Equifax ratings etc then how does one change your habits to stop it happening again? If they're turning us down on something we don't even understand what can one do...especially if they wont even tell you!

chattychappy

dw89 wrote: »

This was a mistake, which I proved and re-applied sending the info to prove it was a mistake. I was still turned down.

Maybe they didn't accept your proof.

Maybe rather than re-apply, you should "appeal". In theory they should then do a manual re-appraisal.