CarefulBuilder14 wrote:It struck me that under certain circumstances, having backdating could potentially harm a person's credit terms.
Imagine CarelessBuilder got an Amex in 1992, got into a lot of debt, and defaulted on it a few months later.
Then CarelessBuilder applied for an Amex 20 years later in 2012 and got approved. The card backdated to 1992.
CarelessBuilder then wants a card from another lender (let's say Chase). Chase does a HP and will come to one of the following conclusions:
A) CarelessBuilder has a 2-year old Amex.
B) CarelessBuilder has a 22-year old Amex.
C) CarelessBuilder had an Amex in 1992, but then did something so awful with his credit that from at least 2004 (ten years ago) to 2012, Amex wanted nothing to do with him. After all, with no-AF card options, why would CarelessBuilder sever all ties with Amex unless he had another great card? Any good history with Amex or another lender since 2004 would appear on the report. The bad behavior was a long time ago, but it can still look bad.
Without the effect of backdating, Chase could consider the possibility that CarelessBuilder never had credit, used a debit card for everything, had a prepaid or employer-provided phone, and maybe was sub-letting or sharing an apartment with someone with good credit. Chase might like these traits in a borrower - at least it might look better than someone with a messy (though very old) credit history.
But with backdating, Chase could wonder what mess was going on in the past.
You're putting more thought into this than 99.9% of credit analysts. I know there was a lengthy discussion about backdating a while back... you made your opinions pretty clear- if you were a credit underwriter in a galaxy far, far away, you would no doubt be carefully digging through Yoda's 900 year credit history to see if there were any youthful indiscretions when he was a young padawan. Heck, for all I know, I could have been your template for "CarelessBuilder" since it is remarkably close to my history.
In the 21st century, most credit decisions are made by computer anyway, and I seriously doubt the algorithm most card issuers use would draw the picture as you did(although I'm sure some probably can recognize a backdated Amex and discount the impact of said accounts).
How about those apps which require manual underwriting? Well, the reason why bad credit goes away after seven years (or ten in some cases) is because most people make stupid mistakes when they are younger and (hopefully) get wiser with age. That's why most credit analysts don't speculate about things they don't know about for sure. They want to know how you've been managing credit recently, not how you managed it 25 years ago, because that's the best way to determine how you will manage the credit they might give you. Besides, Amex is not First Premier Bank- they have a reputation for being strict in their underwriting and being unforgiving of those who screwed them in the past. Most experienced underwriters are probably aware of Amex backdating, but I doubt they think a whole lot about why "Careless Builder" has a backdated Amex with a small CL. Having an Amex in your credit file reporting as "paid as agreed" is probably seen as a good thing regardless of the history with Amex.
In my Wallet:
Sometimes in my Wallet:
- Amex PRG NPSL[3-14, bd 91]
- Sallie Mae MC $8000[1-14]
- Chase Freedom $4700[1-14]
- Discover It $2750[8-13]
- BoA UCF Alumni Cash Rewards $5000 [3-15]
- GM BuyPower WEMC $5000[9-14]
- Wells Fargo Propel 365 Amex $7000[4-14]
- Barclaycard Arrival WEMC $7000[3-14]
- BoA Better Balance $3000[2-15]
In my sockdrawer: Amex BCE $1000[10-13, bd 91], OCCU Duck $10000 [11-13], The Sportsman's Guide Visa $8000[8-14], Chase Slate $4000 [9-14]Delta Gold Amex $2000 [2-15 bd 91], Diners Club MC $20000 [10-14] Commerce Bank Visa $2000 [3-15] Citi Double Cash $1000 [3-15]
Total CL: $90450