Altair
Active Member
- Joined
- Aug 22, 2006
- Posts
- 849
With a past in Banking and credit cards some of the answers are as follows:
1. Credit checks are only done during the initial application for credit. As the process is mostly automated what is searched for is defaults and recent applications for more credit. Note the credit check does not show if the credit application is approved.
2. For the limit increase letter that get sent out no credit check is done before or after. The letter is based on past behaviour.
3. If you initiate your own request for a limit increase two things can happen. Your new limit will be within a "shadow limit" often the same as point 2. or if the limit is above that then an application must be doen and that includes permission for a new credit check.
4. The statistics are misleading as they are taken at one point in time so if people are "transactors" who pay off the entire amount every month their debt is still included.
5. Personal loans have a low default rate and they are also paid off faster than most terms eg. 2 years for a 7 year loan. There is not too much profit in personal loans.
6. Banks do sell off bad debts however it is only between 5-10% of the face value. What must also be considered is the cost that banks face in their own debt recovery process. Most "bad debts" are repaid with either a phone call or letter. With newer alogorithims for credit approval chances of bad debt are actually lower hence cost of credit is reduced.
The credit approval system for banking, CC, PL and Home Loans, has become very automated and the old credit managers have been reduced in numbers and skills. This has all been the result fo cost reductions and approval times.
1. Credit checks are only done during the initial application for credit. As the process is mostly automated what is searched for is defaults and recent applications for more credit. Note the credit check does not show if the credit application is approved.
2. For the limit increase letter that get sent out no credit check is done before or after. The letter is based on past behaviour.
3. If you initiate your own request for a limit increase two things can happen. Your new limit will be within a "shadow limit" often the same as point 2. or if the limit is above that then an application must be doen and that includes permission for a new credit check.
4. The statistics are misleading as they are taken at one point in time so if people are "transactors" who pay off the entire amount every month their debt is still included.
5. Personal loans have a low default rate and they are also paid off faster than most terms eg. 2 years for a 7 year loan. There is not too much profit in personal loans.
6. Banks do sell off bad debts however it is only between 5-10% of the face value. What must also be considered is the cost that banks face in their own debt recovery process. Most "bad debts" are repaid with either a phone call or letter. With newer alogorithims for credit approval chances of bad debt are actually lower hence cost of credit is reduced.
The credit approval system for banking, CC, PL and Home Loans, has become very automated and the old credit managers have been reduced in numbers and skills. This has all been the result fo cost reductions and approval times.
