Amex Rejection earning $300k

[p--and--t]

My brother with no debts applied for a mortgage and was rejected.

After some investigation by the mortgage broker found out a home loan he had paid out some 5-10years ago was never cleared at one of the credit bureaux and still showing as owing plus also showing an unpaid Telstra bill.

Approaches to the previous bank had the record corrected and a letter from Telstra showing no records of an unpaid bill sent to the credit bureaux eventually cleared up the credit score and the mortgage subsequently approved.

 

[33kft]

The bit that is a bit suss to me is this:

5. I do have a line of credit of $300k against my house but its not drawn down. But my borrowing capacity is way more than that. They never asked me this in the application process.

Maybe I am reading your post wrong but they most definitely do ask about loans and I always disclose my LOC (limit and owing) as a mortgage like I would for any property. I know full well it's listed as a loan account on my credit report as I've pulled all 3 of them and in general, my advice is to submit your applications exactly as it appears in your credit file, my only deviation tends to be that I give a more recent balance.

A lender who sees a loan for $300K on your file which isn't disclosed is going to reject your application, imho. A lender who sees a $300K loan with $0 owing is unlikely to assume you'll just draw down the entire amount tomorrow, or those who have made advance payments to their mortgage and have a sizeable redraw would be in a similar situation. They will understand that you have the potential to draw down on it and maybe they'd even model a certain % of drawdown when calculating serviceability, I don't know, but if you don't list it at all that alone could be justification for a rejection.

 

[p--and--t]

The bit that is a bit suss to me is this:

Maybe I am reading your post wrong but they most definitely do ask about loans and I always disclose my LOC (limit and owing) as a mortgage like I would for any property. I know full well it's listed as a loan account on my credit report as I've pulled all 3 of them and in general, my advice is to submit your applications exactly as it appears in your credit file, my only deviation tends to be that I give a more recent balance.

A lender who sees a loan for $300K on your file which isn't disclosed is going to reject your application, imho. A lender who sees a $300K loan with $0 owing is unlikely to assume you'll just draw down the entire amount tomorrow, or those who have made advance payments to their mortgage and have a sizeable redraw would be in a similar situation. They will understand that you have the potential to draw down on it and maybe they'd even model a certain % of drawdown when calculating serviceability, I don't know, but if you don't list it at all that alone could be justification for a rejection.

Yup.

Banks only interested in what you COULD draw down, not current status.

If you have a credit card you COULD spend $15k on but the balance is $5 and paid off every month will be counted as a $15k debt that needs to be factored into your ability to repay.

if you have $100k line of credit fully offset, it will be counted as a $100k debt to be serviced.

 

[Happy Dude]

Seems as though even with the $300k LoC and a bit more debt from Amex, the OP would have plenty of income to service it. Particularly as there's no mortgage or other debt mentioned. It may be the best guess though, but plenty here have higher debt levels and lower income to service it and have had no issues getting Amex cards.

 

[LinaLee]

It’s probably the line of credit is treated as debt to be repaid and money in savings cannot be used as evidence you can pay it off as they would expect that to be spent elsewhere as it cannot be proven as quarantined for the line of credit.

Might be risky to reapply and if rejected as it could affect credit rating. Check with them.

Could call and asked for review. Similar happened to me as they saw a consistent deduction amount of money to a bank which they assumed I was paying off some debt but it was to add to my managed fund outside of super for investment, it was entirely discretionary which I explained and not a debt. Then they reviewed and approved my application. This was with St George. Most banks have similar. Perhaps go through your statement and see if you have a consistent payment that they may construe as debt payments. Humans make mistakes , bots use algorithms programmed by humans looking for patterns leading to assumptions…..

 

[SCM]

I don't understand how or why a line of credit against an asset would matter if the asset value exceeds.... it makes no financial sense.

Many people have lines of credit for business, for investments, etc. If you have 10 million in assets and 1 million in lines of credit, are you a credit risk? Obviously not.

 

[N0mad]

Maybe I am reading your post wrong but they most definitely do ask about loans and I always disclose my LOC (limit and owing) as a mortgage like I would for any property.

Can confirm, applied a few days ago. I was only asked the status of the house i live at eg mortgaged. nothing more eg total debt, mortgage repayments etc

 

[p--and--t]

I don't understand how or why a line of credit against an asset would matter if the asset value exceeds.... it makes no financial sense.

Many people have lines of credit for business, for investments, etc. If you have 10 million in assets and 1 million in lines of credit, are you a credit risk? Obviously not.

Actually from real life experience the banks don't think the way you do. Assets almost irrelevant, proof of income to support repayments is more important

The days of LVR assessment being prime are long gone.

 

[33kft]

Can confirm, applied a few days ago. I was only asked the status of the house i live at eg mortgaged. nothing more eg total debt, mortgage repayments etc

Interesting. Must be relatively new. I'm a long time churner and never have I not had to disclose this, including for my AMEX (but this goes back about 18 months now).

To be honest, I'd be happy if the banks just pulled it from my credit report. Less work for me.

 

[BriarFlyer]

Interesting. Must be relatively new. I'm a long time churner and never have I not had to disclose this, including for my AMEX (but this goes back about 18 months now).

I've also applied in the last week and was amazed at how little info was requested. And no follow-up thus far requesting documents, proof of income etc.

 

[SCM]

Actually from real life experience the banks don't think the way you do. Assets almost irrelevant, proof of income to support repayments is more important

The days of LVR assessment being prime are long gone.

But that's really dumb. What if my income is $1? What if I am retired? What if I have a 100 million sitting in my bank account? It's completely illogical. Would Elon Musk get rejected for an AMEX because he has no salary?

It's just not the way the financial world works, someone's liquid assets and cash position should be the most important thing.

 

[aikman]

But that's really dumb. What if my income is $1? What if I am retired? What if I have a 100 million sitting in my bank account? It's completely illogical. Would Elon Musk get rejected for an AMEX because he has no salary?

It's just not the way the financial world works, someone's liquid assets and cash position should be the most important thing.

Except that you could blow all of your liquid assets and cash at the poker table tonight, or worse, lose it all on an online romance scam. Then how will you service your bank loan tomorrow?

If you had a reliable regular monthly salary on the other hand...

 

[levelnine]

Except that you could blow all of your liquid assets and cash at the casino tonight. Then how will you service your loan tomorrow?

A salaried person could also lose their job tomorrow and have no way to service their loan.

It's a silly metric, but it's the one banks use so you need to deal with it — you have to work with the system that exists, not the system you wish existed.

 

[DC3]

It's a silly metric, but it's the one banks use so you need to deal with it

Great comment

 

[Peregrine]

A timely post as I was just about to push the button on an Explorer application and made me reflect on my $100k line of credit. I'll come back to AMEX later in the year.

While AMEX may have toughened up, credit assessments are based on income actually hitting your account - irrespective of wealth which can be dissipated, gifted to family etc. and the money is gone. If the person loses their job, they have the capacity to get another one, albeit income may dry up for a period.

As others have noted a line of credit is relevant in credit assessments up to the full amount that can be borrowed , it wouldn't seem a $300k LOC would be fatal to OP's application - $300k @8% say would only be $24k a year.
I think 2 in child care would also be significant - 2 children at say $150 a day x 50 weeks = $75,000 a year (if my maths are right.)
Amex would also know that if the person doesn't pay childcare their income is also likely to be less.

 

[N0mad]

I've also applied in the last week and was amazed at how little info was requested. And no follow-up thus far requesting documents, proof of income etc.

When did you apply, are you still waiting on approval or rejection notification?

I applied Tuesday and nothing yet

 

[SCM]

Except that you could blow all of your liquid assets and cash at the poker table tonight, or worse, lose it all on an online romance scam. Then how will you service your bank loan tomorrow?

If you had a reliable regular monthly salary on the other hand...

You can do that way easier with a monthly salary, and you can be fired any day. What's your point?

Who is more likely to blow all their money - someone with 1 million in their bank account or someone earning 10k a month? Think about it for 2 seconds.

 

[BriarFlyer]

When did you apply, are you still waiting on approval or rejection notification?

I applied Tuesday and nothing yet

Applied 6/2. Is that the same Tuesday as you?

ETA: the rejection has arrived.

 

[N0mad]

Applied 6/2. Is that the same Tuesday as you?

ETA: the rejection has arrived.

applied 13/2, heard nothing so assume i'm also rejected.

 

[theblank]

But that's really dumb. What if my income is $1? What if I am retired? What if I have a 100 million sitting in my bank account? It's completely illogical. Would Elon Musk get rejected for an AMEX because he has no salary?

It's just not the way the financial world works, someone's liquid assets and cash position should be the most important thing.

its not dumb. Credit cards is a mass scale business. They work in %'s and big data

If they really wanted only quality applicants, they would get a senior manager to personally interview each one. but that would mean higher acquisition costs and so few clients (due to the time that takes).