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Each week, we receive dozens of comments on applying for loans and credit card. The most common question involves why a member was declined even though their credit score appeared high enough for approval based on the credit scores of other members who were approved recently. With so much confusion, we thought it would be helpful to dig into the data and answer the question in more detail.
The first thing consumers should understand is that the underwriting process, the rules that determine whether a consumer gets approved or declined for a credit card, is the secret sauce of credit card companies that determines the profitability of each cardholder, the credit card portfolio, and in many cases the entire business. The underwriting process is responsible for the amount of risk credit card companies take on and how well they can predict the performance of consumers they approve to become cardholders. A difference of a 5% customer charge-off rate to a 10% customer charge off rate in a credit card portfolio can be worth hundreds of millions of dollars to the credit card issuers. As such, you can imagine lots of money is spent refining the logic of the underwriting process, testing new logic, and protecting that logic from competitors.
With so much to gain and so much to lose for credit card companies, it’s easy to understand that a credit score alone is not sufficient to determine approval or declines for credit cards. So, what other factors are used to determine which consumers will be approved and which will be declined? To answer that question, we spoke to an anonymous credit card statistician who has built these formulas for the past 15 years. He shared there are 6 other leading factors, in addition to credit score, that will determine a consumers likelihood to be approved for a credit card.
This list isn’t intended to be inclusive of all the decisioning criteria as the process and models can be quite complicated. Instead we hope the list sheds some light on the other components that go into approving consumer’s loan or credit card applications.
When you see the Credit Karma credit card approval score data also consider how lenders will view you across these metrics as well before you apply. If you barely make the average credit score for approvals, consider applying for a card with a lower credit score requirement. We hope this article helps shed more light on the credit approval engine.
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AS A FOLLOW UP TO MY SUBMISSION I SHOULD HAVE EXPLAINED THAT MY CURRANT UTILIZATION IS 3%!!!!"
no1mrrythem at 2:08 pm Mar 17
Reply Cancel ReplyI take issue with several statements listed above. IE: Hard inquiries... MINE---- (1) put there by chase--- on feb. 12 -2010 !! Age of oldest trade....28 years guess who(CHASE )(never late most always carry a $0 balance and/or pay off each month)!!! Presence of mortgage!!!! You say owning a home can actually help you when it comes to underwriting... mortgages denote stability!!! Maybe.. but I own my home and have for many years and also my cars. My opinion ... this (credit scores) is all for the total and complete benefit of lenders and banks and while this is not all bad it is very deceitful in that the consumer has no idea what scores(more revenue makers) are the PROPER ONES.It is typical cat chase tail!!!SPEND SPEND SPEND. That is what the banks and credit score companies want!!! I applied (with chase a CO. I have been with for 28 years) for a 0% balance transfer ($1800.00) on Feb.10 th. 2010 and of this date i have received always the same response...you will hear from us within 10 days. Of interest.. the answer at first came from Manila, than later from Taiwan than the Philippines and on and on it goes. Just another situation (outsourced jobs) why our country is in trouble!!Finally I made the effort to go to a local chase branch (28 miles one way) and could not get a resolution there either!!! Now who am I???? I am a private business owner (40 years)! Same state! Absolute perfect credit report and scores AS OF THIS DATE(807-804-825)! I own my home and I own my cars, and have a very large credit line.However, I am unable to get satisfaction($1800.00) from chase... Could be a good idea to stay away from them.....HOWEVER.. look who the loser is if i cancel my cards( the consumer(me)). Now that I own CHASE I cannot get A loan from them. HOW IRONIC. Good thing i do not need the money!!!!REST ASSURED 50 CENTS WORTH OF GAS A MONTH WILL NOW COST THEM (IN OVERHEAD) AT LEAST $3.00. THANKS FOR hearing me out!Karma what is your take on this one???? I HAVE NOW BEEN AWAITING AN ANSWER FOR 37 DAYS!! I await your thoughts BEFORE CONTACTING THE FTC. Thank you!"
no1mrrythem at 2:06 pm Mar 17
Reply Cancel ReplyWhat is the question? You are looking to BT to a new Chase card but it is in limbo?
CK Moderator
YOU ARE CORRECT!!!! MY QUESTION IS TWO FOLD.....WHY SEND ME AROUND THE WORLD TO THREE CONTINENTS WITH A FABRICATED ANSWER AS TO WHY NO COMMITMENT. I APPLIED AND COMPLETED A MORTGAGE AND MOVED INTO MY HOME ALL IN 10 DAYS AND TODAY IT HAS TAKEN 48 DAYS FOR A SMALL $1800 0% TRANSFER CARD TO BE APPROVED BY A COMPANY I HAVE BEEN WITH (WITH PERFECT PERFECT CREDIT---AS WITH ALL MY OTHER CREDIT)FOR OVER 28 YEARS!!!! NO, MY CREDIT IS PERFECT AND MY SCORES ARE ALL IN THE 800'S!!I guess my former question(s) and statements were confusing. None the less my points in my former statements ( why we are in so much trouble (lack of jobs etc.) still apply! thanks again. Also--(previous comments) when you go to the source (chase branch v.p.)and he cannot--or will not answer you STRAIGHT-- something is wrong in this homeland! I for one fought hard for my(and your) rights and to have this childishness being played by our currant generation is sickening!!! Again. your comments will be appreciated!! Thank you."
no1mrrythem at 1:35 pm Mar 18
Reply Cancel ReplyMy score is 665 and I am slowly rebuilding my credit. Is it better to pay off my credit cards and close the accounts or should i leave them open for the sake of my credit score."
jlwdalfan at 10:33 am Mar 17
Reply Cancel ReplyIf there are no annual fees or inactivity fees, keeping them open is generally better.
CK Moderator
I moved to the US July 2009, got my SSN october 2009 , my bank account DECEMBER 2009 (JOINT ACCOUNT THAT WAS OPENED 3 YEARS AGO )THEN CHECKED MY SCORE AT CREDIT KARMA IT WAS NO RECORD (THIN FILE UNTIL FEB 28TH , I APPLIED FOR CC ON BANK OF AMERICA GOT REJECTED AND THEY QUALIFIED ME FOR A PARTIAL SECURED CARD AND I APPLIED FOR GOT APPROVED AND ASSIGNED A CARD I DIDNT EVEN GET IT IN THE MAIL YET AND CHECKED MY CREDIT SCORE TO FIND IT 734 ,HOW WOULD THIS BE?"
momen at 9:17 am Mar 17
Reply Cancel ReplyBased on your data, you are probably still considered "thin file" even though you have a great score. The implications are that you will still be reject by some lenders because of the "thin file" categorization.
CK Moderator
I had no credit history until FEB 28TH 2009 then i applied for a half secured credit card from BOA got the card never used it yet, any now i checked at credit karma and found my score is 734 how is this?"
momen at 3:48 pm Mar 16
Reply Cancel ReplyWithout knowing your full history, it is hard to say. But sounds like you have had credit for at least one year, with low (zero) utilization, and no delinquencies. These are hallmarks of good credit.
CK Moderator
i never got a credit card , i moved to the US in june , got my SSN in october 2009,my bank account in december (joint account) then I checked my credit score at credit karma , it said nothing on records (thin file) until Feb 28th . so i applied for BOA credit card and was denied so they recommeneded a partial secured card , i applied and got it but didnt even recieve the card yet and my credit score is 734.how?"
momen at 9:10 am Mar 17
Reply Cancel ReplyI have very poor credit (FICO 570). I filed Chapter 7 Bankruptcy last year and my FICO seems to decline every month. How do I begin credit repair?"
Jen01234 at 1:38 pm Feb 28
Reply Cancel ReplyWe just received our Chapter 7 discharge but our credit score here is still 691. I would think it would be lower. Is this correct?"
flags6262 at 3:16 pm Feb 24
Reply Cancel ReplyI begin to use credit card last September, and because I paid all my balance on time, my credit score increase to 911 last month, however, this month it decrease into 694, I do not the reason, because I still pay my debt on time."
hotstoneli at 2:30 pm Feb 15
Reply Cancel Replysorry last month my score increase into 711"
hotstoneli at 4:35 pm Feb 19
Reply Cancel ReplyAccording to Credit Karma my score is 683. I have one credit card with a 170.balance. I have not been late on any payments and usually pay off the balance each month. I have not applied for a loan in nearly two years when I purchased a car. I recently applied for a loan at the bank where I do my banking and was told my credit score was 550. Why go to the trouble of tracking my score here or any where when it is so misleading?"
gjb at 8:14 pm Feb 11
Reply Cancel ReplyAn individual may have many different credit scores depending on what the inquiry is for. Mortgages and loans usually require a different scoring model than credit card approvals.
CK Moderator
It's too complicated for me to get in to all the details here - for brevity purposes, read this: your credit score is a combo platter of the major "BIG THREE" reported scores (your FICO score varies from report to report based on the fact - one of many facts - that the company reporting gets to choose the credit bureau(s) of their choice to report to). Once these three scores are added together, the average of the three scores reveals your actual score. Also, or on the other hand, your FICO score (reflected in CREDIT KARMAS'S records) is the larger of the three scores."
This may or may not be totally accurate - my synopsis, that is. You can email CREDIT KARMA for their version of the "facts" above, or better yet, GOOGLE the words THE CLARK HOWARD SHOW, go to his website and SIGN UP for "THEE" consumer's best ally in the world of consumer credit, protection from fraudulent activity in business, etcetera. You would do well to absorb much of this family man's 30+ year consumer advocate experience, which he utilizes to host his daily radio program in many markets.
mauscoman at 8:00 am Feb 18
Reply Cancel ReplyMy credit score is 703.I have 19% of my credit used. I am 99.67% on time,But my average years of cards is 3. Total accts is 17 with 7 open. Should I close newer accts that i dont use, to increase my score?"
moesha at 8:35 am Feb 11
Reply Cancel ReplyYou should close accounts if you don't use them and if you feel that the fees are high. If they are good cards with good rates, you should use them for minimal monthly purchases so that they will actually help your credit score.
CK Moderator