Credit Card Company ‘Back Office’ Executive Spills Secrets

an executive from a top five credit card company spilled a ton of secrets about underwriting approvals and credit limits they even gave advice on how to get a $300,000 credit limit how to avoid three behaviors that make you look super risky to the bank and the Forgotten super old strategy that you can use to increase your approval odds and the first person Came Out Swinging and asked which credit card company do you work for otherwise how can we apply anything you say and they said because almost all the top credit card companies if not all operate the same way when it comes to the backend operations and yes customer service varies significantly but not the stuff behind the scenes now this might be true about the backend but I can show you a few front-end operations that are a whole lot different than most banks like nine credit cards that show your starting limit before approval you can find that cheat sheet Below in the description and don't worry it's completely free so you know the bank has a bodyguard that everybody has to get paid right you know what it is it's the computer algorithm they use to automate the approval process a lot of people still don't understand that the algorithm is constantly changing and this executive talks about how they make those changes the first question is does your company use its own internal scoring model and they said yes our bank has its own internal scoring model which includes but is not heavily dependent on FICO scores we typically review customer credit once a month but certain triggers can increase that frequency these triggers include a rapid increase in credit card debt Mis payments with other creditors suddenly only making minimum payments or changes in long-standing payment Behavior moving on can switching from full payment to minimum payments trigger extra scrutiny and they said yes it's developed by our banks programmers it then runs through a process of validation to ensure the risk model correlates to our bank's past experiences if the model predicts what will happen based on what had happened with a high degree of accuracy then it's given a example of approval the model is always being refined constantly to make it more and more accurate in other words let's say someone with a 90% total credit utilization applies for credit it is possible that the customer will be very profitable and use the card a lot and pay a back but our risk model says the chance is high the person will not pay us back are file bankruptcy each month we get more and more data on our customers therefore a larger sample size for our statisticians to run statistical hypothesis testing only the model to refine and increase the model's accuracy we know that there's no such thing as a perfect model what I am saying is that a person with a perfect 850 can apply for credit be given a high credit limit and file for bankruptcy 6 months later giving us a huge loss a person with a 64 FICO can turn out to be a great customer with eight years of perfect history and give us a nice profit in interchange fees or swipe fees and interest charges these are actually true cases by the way next how are decisions like credit line reductions or account closures made these adverse actions are mostly automated decided by the computer system based on our internal risk models human intervention is minimal and the process is designed to be efficient and compliant with Federal Bank laws now how does your underwriting respond to new accounts with high credit limits they said while we want customers to pay interest as it's a revenue Source a rapid debt increase or minimum payments are risky if you manage new high limit accounts responsibly especially with substantial pay payments it shouldn't be an issue next does applying for several cars in a short period of time trigger a review they answer by saying yes applying for multiple cars quickly can trigger a review as it may indicate potential fraud or desperation for credit our model doesn't typically consider activities like bonus Point accumulation Which is less common among our customers now how are different types of delinquencies considered in credit decisions they said delinquencies on auto loans and student loans are penalized more heavily compared to Medical collections which are often seen as less predictive of non-payment risk due to their unpredictable nature moving on do credit inquiries affect the APR you receive they said while inquiries older than 12 months are not considered by FICO we do look at them as part of our broader evaluation however inquiries play a small role in determining APR as other factors are more significant now what impact do low usage and immediate payments have on an account they said low usage doesn't flag an account negatively at our bank but we recommend using the card at least once every 6 months paying off the car immediately is fine but multiple payment sources can flag an account for review to prevent illegal activities now how does your risk model view cash advances they said cash advances put an account under closer scrutiny to ensure that there are no signs of financial trouble leading to more frequent reviews moving forward when is proof of income required they answer and they said proof of income is usually not required for those with excellent credit as their history implies real liability for others especially if the stated income seems questionable proof might be requested though it's a small percentage of cases we recommend including all income sources when applying now how are authorized users viewed in the internal model they said authorized user accounts are not given the same weight as individual accounts while being an authorized user can boost your FICO score and help with approvals it carries little weight in our internal model this applies regardless of the relationship with the main account holder next is carrying a balance scene favorably for building a relationship with the bank and they said carrying a balance is not necessary to build a relationship with the bank paying on time is more important while Banks profit from interest on balances High utilization or nearing the credit limit can be risky it is advised to pay in full or more than the minimum next how many credit inquiries are considered too many they said the number considered too many varies based on several factors including the bank's risk appetite and the type of credit card generally over 10 inquiries in a year with one credit reporting agency may be seen as excessive and you know what that's true because because the large National Banks like Chase and Bank of America will deny you for credit with excessive inquiries they call it credit seeking but you can still get approved for 50 plus thousand of credit especially on the business side if you know what Bureau each lender pulls from and you target Regional and Community Banks right down the street from you data points have shown that those lenders are willing to work with you on an individual basis and even Overlook excessive inquiries many of them only pay attention to how many inquiries you've had over the last days not the last 6 to 12 months like Chase does and I just released a 60-minute workshop called how to fund your small business in 30 days or less without proof of income in that Workshop you'll learn how to create a bulletproof credit profile that banks will approve instantly how to massively increase your approval chances by eliminating all the business killing mistakes Banks always catch you'll find out how to max out your credit limit with every Bank using my proven relationship building strategies and create a custom funding sequence to get get your business funded by the top banks with the least amount of inquiries Plus I even include a 0% APR Credit Card Master list with over 60 Banks and my net 30 vendor Master list with over 70 Business vendors so definitely hit the link below to start getting your business funded with tens of thousands of dollars next we need to talk about manual underwriting particularly how Chapter 13 Bankruptcy is viewed more favorably than Chapter 7 bankruptcy the next question is do Recon credit analysts have quotas for card approvals and is there a best time to call for reconsideration and they said credit analysts do not have specific quotas for card approvals their approach is cautious prioritizing the bank's Financial Security ideally they would approve everyone for customer satisfaction but realistically many reconsideration calls involve applicants with poor credit histories bankruptcies or previous non-payments the bank's decision-making relies on a well-established internal risk model however those with low scores from past Financial missteps such as bankruptcy are consistent late payments are unlikely to benefit from reconsideration regardless of the persuasiveness of their appeal now does calling multiple times increase your chances of credit card approval and they said yes but only if you're borderline eligible calling repeatedly with a very low FICO score like a 500 won't help but if you're close to being approved who you speak to and their discretion might make a difference next does providing explanations for credit issues help in approval the answer is it can while a computer assesses credit files human analysts can consider individual circumstances for example if a single account issue appears fraudulent and the rest of the credit history is good an analyst might approve the application however a very poor credit score with multiple negative accounts is unlikely to be overturned by explanations next our credit analysts reprimand it for inappropriate approvals and the exec said not if the approval is made in good faith and can be reasonably Justified however approving someone with a very low credit score and a history of bad accounts can lead to disciplinary action next why hire some credit card companies inflexible with APR and credit limit adjustments and they said different banks have different risk appetites some are more conservative and adhere strictly to their underwriting criteria While others may be more flexible Banks must adhere to underwriting criteria limiting how much they can adjust APR and credit limits just because a customer requested now does the type of bankruptcy on a credit report matter and they said yes a Chapter 13 Bankruptcy is viewed less negatively than a Chapter 7 bankruptcy because it involves rep payment of some debt the internal scoring system penalizes chapter 13 less severely recognizing the effort to repay and how long should one wait after bankruptcy to apply for credit and are bankruptcies flag for manual review here's where they said the wait time depends and the bank's policy might vary a Chapter 7 bankruptcy stays on a credit report for 10 years and a Chapter 13 for 7 years a bankruptcy involving the bank is viewed more severely than one that doesn't and how is credit card fraud handled they said legitimate fraud cases won't lead to account closure regardless of the car's limit Banks closely examine claims especially if there's more than one claim per year let's move on to credit reporting and how the bank plays favores when it comes to addressing late payments here's the question how much Authority do employees have to change or remove items from credit reports like late payments and they said officially accurate items on credit reports are supposed to remain however there are some flexibility here for instance if a long-term customer with generally good credit disputes and a single late payment we might agree with the customer even if it's not entirely accurate but for those with a pattern of late payments we're likely to uphold accuracy of the report the decision- making can vary among employees some are more by the book While others may be more lenient it's about assessing the whole customer profile and history the next person asked why is a credit account only considered aged after 6 months and they said this Criterion comes from FICO scoring model not our bank FICO determined that a minimum of 6 months of credit history is needed to accurately score someone's credit worthiness a longer credit history provides a better indication of financial behavior and stability which is crucial for risk assessment now let's cover credit limits and how a back office executive would go about obtaining a six-figure credit limit so here's the question how was the initial credit limit determined the exec said that the initial credit limit is calculated by our system based on your credit report considering your average and highest credit lines and utilization rate we aim to offer higher limits but this depends on your current financi situation generally those with low utilization rates receive higher limits while higher utilizers might get lower limits due to perceived Financial strain next does having higher average credit lines mean larger starting limits and they said High limits are determined by automated systems following strict underwriting criteria for a guaranteed high limit in the range of $100,000 to $300,000 a practical approach could be to secure it with a deposit at a credit union creating a collateralized account next can customer request influence credit limit increases and the answer is while a large amount in savings is a positive factor Banks consider a range of factors beyond just savings when setting credit limits Banks often have preset maximum limits for different car products which are not solely based on individual savings or net worth now how does existing total credit limit affect new account approvals and they said your total credit limit across all lenders even if it exceeds twice your annual income doesn't significantly affect new account approvals at our bank we're more concerned with your ability to maintain Lo utilization and make ontime payments than with the total credit available to you now why do different cards from the same lender have varying aprs and credit limits and they said while credit card companies benefit from fees and interest paid by revolvers approval for credit limmit increases doesn't strictly favor either group the key factors are your credit utilization rate and debt to income ratio high risk behaviors like debt pyramiding will likely lead to denial to lower your utilization you can either get approved for more credit or raise your existing credit credit limits if you have bad credit you know how hard it is to get that next approval it feels like nobody wants to give you a chance however there's a credit building plan that offers up to a $25,000 reported credit line with no hard credit check to sign up this reported credit line starts at $500 and lets you build up to 25,000 depending on how many bills you add for payment and after using it one person saw their credit score Jump by 28 points in the first month definitely check that out in the next video to find out how it can work for you and how you can sign up thank you for watching

Channel: Cal Barton

Views: 73,125

Keywords: #callmecal

Id: B1vRn9UpL7I

Length: 13min 30sec (810 seconds)

Published: Thu Feb 22 2024