[quote=patientlywaiting]If credit card lends had to ask customers to submit personal financial statements for analysts to review, then cost of credit would be much greater.
It’s much more cost effective to use computerized models.
[/quote]
This is true, but I do have a suggestion. I think the (purportedly cost effective) “model” is appropriate for a certain level of unsecured credit – maybe, $15K or less (you pick the number). BUT… I think it’s ridiculous to offer folks $20K+ of unsecured credit solely on the basis of credit scores and a credit application in which nothing’s checked but a credit report. That just seems patently reckless.
My suggestion would be to pick a number beneath which the credit score/application model is going to be used – $15K-$20K, or whatever – and for amounts over that limit, require a full credit application with tax returns, pay stubs, etc. – just what a small bank would do if you wanted an unsecured loan of the same kind.
I have two personal credit cards and two business credit cards, none of which I carry balances on. The two personal credit cards have credit limits of $43,800 and $21,500 (why the disparity I have no idea – and they’re both with Chase!). The two business credit cards have limits of $12,000 and $48,000 (again, why the disparity I have no idea – and I’ve never even charged anything on the $48K limit card.) In my view, despite the fact that my FICO is 800-ish, this is absurd. These companies – Chase and AmEx – should not be handing out unsecured credit in $20K+ amounts to folks like me that haven’t filled out a “proper” credit application. Now, I’m a good credit. But, frankly, they don’t have enough information to know that. Which is why they’re going to be eating a shitpile of charge-offs over the next couple of years.
The rising economic tide of the previous decade hid a lot of swimsuit-less folks out there. Now that the tide’s going out we’re seeing a lot of unpleasant-looking genitalia.
