I applied for a credit card the other day and was denied. The reason they gave me is that I do not have enough of a credit history to qualify for their card. Admittedly, I applied for the “highest end” card I could find, so it is probably my fault.
My credit history is spotless. I did another review of my credit history on all three agencies and found nothing wrong. I realize now that a person’s credit history has almost nothing to do with their ability to pay.
I could pay off in cash many times over the limit they would have given to me. If I was someone who was living paycheck to paycheck, but relied on credit extensively to survive, I probably could have gotten that card. So this seems to me to be a ridiculous finance situation.
I believe that the extensive reliance on credit histories and scores, and the disregarding of overall financial situation, is setting up the US for serious credit card problems. Rising unemployment will exacerbate the situation.
The credit-card industry’s default rates are ``all but certain’‘ to surpass post-recession peaks reached in 2003, Moody’s Investors Service said in an Oct. 16 report. Unemployment may rise until the fourth quarter of 2009, pushing the default rate to a peak of about 8.5 percent from 6.82 percent in August, Moody’s said. link
A credit card company, or bank, would outperform if they started looking at an overall financial situation before issuing credit. The process would be similar to the process for applying for a house. The issuing institution gains clients and reduces their risk. And consumers may benefit with lower rates and “safer” credit limits.
I’m sure there are arguments against this, but the current system is nonsensical and broken.
