It is interesting to see how the dominoes fall in the financial world, and one of the most entertaining stories I have is from about 30 years ago as my wife and I were looking to buy our first house. By being a good consumer and looking for two different deals, I created an anomaly.
As we shopped for the first Big Cajun Hacienda, Mrs. C8j and I decided we needed to shop around to get the best mortgage deal, that was possible at the time. At the time interest rates were very high and we were hoping to find as low a locked in rate as we could (it ended up being 12.5% for a five-year term). We spoke to our bank (at the time) Scotiabank. My brother had (at the time) a good deal (in his opinion) with BMO, so I went and spoke to them as well.
Both banks wanted to “pre-approve” me for a mortgage on the basis of my income. They both came back with about the same deal for me, so we were leaning towards Scotiabank (as they were our current bank). Scotiabank also suggested I apply for their Visa card to help with moving expenses and such. It seemed like a good idea (at the time).
The application seemed straight forward. Three weeks later I got a terse, but polite, letter saying that my application for the Visa Card was denied. There was no explanation but a note thanking me for applying.
I was mad. I phoned the number on the letter to get an explanation. Then I spoke to a very patient and nice lady at the Scotiabank Visa help center. She explained that my file had been flagged. Due to this flag my application was refused.
“Why was the my file flagged?”, I asked.
The answer was simple. My “credit file” had been accessed twice in the week before my application. This caused the system to kick out my application as high risk. Why did my “credit file” get accessed? Remember those two pre-approvals? Those two procedures cause the whole system to suddenly view me as a bad credit risk. I was a bad risk because people were looking up information on my credit, as simple as that.
Once the patient young lady on the phone and I figured this out, she said she could put through my application, and get me the card in a few days. I decided not to do that, and decided to go with BMO instead.
This was my first exposure to the Business of Credit, Mortgages and Banking. It was an eye-opening experience, and from that I have learned to be wary of banks, and to always ask questions about all processes no matter what transpires.
My credit card application was refused. Anybody heard of that these days ?
I can understand banks doing this. They don’t want a person to apply for 3 credit cards, a line of credit, a home equity loan, pull out cash advances on all of them, and then run away (for good) to Aruba. I bet this scenario is attempted by someone out there almost daily.
Funny, I called one company to have my credit limit *decreased*. (What in the holy hell do I need $20,000 on a credit card for?) When told doing that could (somehow) “negatively effect my credit score,” I replied, “Go ahead, negatively effect away! “
Excellent retort! Kudos!
We have a mortgage up for renewal next March and to be sure we get the lowest possible rate (1.99% sounds good doesn’t it?), I want to do a credit report and score check before hand to make sure all looks good. I’ve been using a strategy of prepaying my mortgage with a .99% interest low rate credit card, and ensuring it is paid before the interest rate increases. I currently have 6K on that card, to be paid by August. I won’t be doing that again for a while because I need to keep my credit limit versus use to less than 25% to ensure my credit rating is not impacted before my mortgage renewal.
1.99% I think I would have given a kidney in 1990 to get that rate!
Decades ago, I also was denied a credit card. I was told that I had an unpaid account at Kmart, and until that was paid, I would not be issued a card. I let that sit for a while, and a few months later I tried again. Denied again, same reason. This time I got active about it and got them to give me the delinquent account number, and said well, if it is my account, there is no reason I cannot have the number. Then I called Kmart’s credit department, and it turned out that they had put someone else’s bad account in my name. Same first name, but different second and third name, but same last name. (I go by my third name as we are all called the same Christian first name). When I figured out that they had the wrong person flagged, I raked them over the coals and got them to immediately advise the credit bureau of the error, AND send me a letter letting me know when they had done this. I ended up getting that credit card.
These days I only get collection agencies calling for the person who had my phone number before me. I have had the number for 4 years, and I STILL get calls! They have the gall to ask me if I know where he is! I am sure that the phone company gives old phone numbers, (that they put out of use for 6 months between users), to friends of the previous user. At least that is what collections people think! Seems that they sell the bad account every year as I start getting a rash of calls about the same time every year. This year I plan to get their company name and address and send a cease and desist letter, or I am going to own me that company when I sue them.
It does seem like the system could use a few fixes here and there doesn’t it? Or a complete bloody overhaul.
In retrospect it is quite clear what happened: Every hard inquiry (i.e. a potential lender accessing your credit record for the purposes of granting you additional credit) temporarily lowers your credit score.
Do it often enough and you drop below the credit rating threshold required to get that card. This is why it’s so important to only ask for credit if and when you need it.
Another gotcha is having a balance of more than 35% of your credit limit on your statement. That also damages your score, even if you pay the full statement balance every month.
I don’t recall ever hearing of an experience such as the one you encountered with the credit card application. It’s a good thing you took the time to find out why you were rejected!
As for your mortgage negotiations did you consider using a broker? I used brokers twice for renewing my mortgage. They saved me an enormous amount of interest over the years & didn’t cost anything for their services!
Given it was 25 years ago, and nobody told me about that possibility, no, unfortunately. I think I’d talk to a broker now just to find out what the lowest they could find me (might not use them, but I’d certainly talk to them).