Why Good Credit Cardholders Denied Credit

Did you know that the decision by your credit card company to give or deny you credit is based on a model in which macroeconomics is applied to the individual?

For example, a number of credit card customers who recently applied for credit card accounts with Capital One were denied credit because of - get this - “worsening economic conditions.”

OUTRAGE PROMPTS APOLOGY

So many customers expressed outrage at being denied credit based upon such a sweeping generalization (that could be applied to anyone anywhere) that Capital One was forced to issue an apology. Furthermore, the official statement said that “worsening economic conditions” will no longer be used as a reason for denying credit.

What this really means is that reps will be instructed not to tell potential customers that this is the reason - or one of the reasons - used in determining eligibility for a credit card or credit limit increase. 

DEMOGRAPHIC VARIABLES ARE USED

Neither Capital One nor any other credit card company is going to stop using broad demographic information to assess credit eligibility. It only means that credit card companies will put internal policies in place in an attempt to ensure that potential customers are not aware of the kind of factors that are considered when applying for a credit card.

Every day I speak with credit card customers who have been denied more credit in spite of good credit scores and impeccable credit histories. These customers, of course, cannot understand why they are being denied credit - or credit increases - and believe these denials are unfair and unfounded. Their instincts are often correct.

WHAT’S IN YOUR PROFILE?

The truth is that, when you are denied more credit on your account, the reasons for that denial are not just based upon your history or credit score. Credit card companies spend a lot of money researching all kinds of factors that are then considered part of your profile.

Where you live, what you buy, what age group you fall into, and the lending and repayment patterns for your area, gender, and occupation - these kinds of variables go into the mix upon which the decision is made.

THE PROPRIETARY PREDICTIVE MODEL

Bottom line, the ‘give or deny credit’ decision is based on a macroeconomic predictive model which is applied to the individual.

Yet you will never be told exactly what that model is, or all the factors or variables that comprise it. The attitude of credit card companies, when it comes to denying credit, is that the information used is proprietary. The lender paid to collect the information and no credit card lender is going to just give it away. So, most consumers with good credit who are denied more credit will never really find out why.

THE COUNTER-STRATEGY

As a result, there is really only one strategy possible for counteracting what so often feels like arbitrary decisions on the part of credit card companies, and that is to be prepared.

Find out all you can about the way credit card companies operate and create back up plans. Have back up credit resources and manage those resources wisely.

The way I see it, credit cardholders have two choices. They can continue running in circles, reacting to what credit card companies do, or they can become educated, empowered, and proactive in protecting their own interests.

For those who want to be members of that second group, I strongly recommend Money-Saving Credit Card Secrets. There isn’t another informational product like it on the market and, with its 60-day money-back guarantee, getting it should be a no-brainer.