Why instant approval isn’t always instant

approved or rejected stamp

The card’s website offers you “a decision in seconds” or even an “instant” decision. You eagerly fill out the online form, hit submit … and get a message saying that the issuer needs more time to make a decision. It might even ask you to send in more information to verify your address and Social Security number.

So why did your application get caught in the net instead of getting speedily approved or rejected? We asked Kevin Haney, a former sales director at a big-three credit bureau who shares his industry knowledge at SavvyOnCredit.com, for some insight.

The first thing to know is that banks and consumers want the same thing.

“Consumers want to want an instant answer,” Haney says. “Nobody likes to wait. And being able to get an answer to people quickly is something the banks would like to do.”

When you hit the “submit” button, a credit report is immediately pulled and the issuer’s system parses it, as well as your credit score. It takes mere moments, but the process is sophisticated; over decades of analyzing cardholders’ behavior (good and bad) and credit reports (good and bad), banks have a sense for what kind of consumers they want, Haney says.

After this blink-of-an-eye analysis, banks will put you in one of three categories: “Instant approval,” “instant denial” and “manual review.” The first two categories are ideal for the bank because they’re less expensive.

“But there are always going to be a group of people in the middle,” Haney says. “They require a person to look through their application.”

So why did you wind up in the manual review category? There are several possible reasons, which usually boil down to something in your report looking risky (you may rack up a bunch of debt and not repay it) or fishy (you may be fraudster applying with a stolen identity):

1. Your score

Each bank has its own criteria for approvals, and one is the credit score. Scores over a certain mark (determined by the bank) will mean instant approval, and scores under a certain mark mean instant denial. But there’s often a gray area between those two points, Haney says. And applicants whose scores fall within it leave the issuer unsure.

“They don’t want to turn away possible customers,” Haney says. “But the value of a good, solid customer is much smaller than the potential losses from a bad customer.”

So those applications get sent into a manual-review queue so that a human can take a closer look at other factors in the credit report.

2. Other elements of your report

Even if you have a good credit score, other information in your report may get flagged by the computer and passed on to an analyst for manual review.

Some of those things may include having having more open accounts than the bank is comfortable with, or just having a certain combination of factors that has a reputation for risk.

“The bank is saying, ‘We like the score, it’s good for us, but then there are additional things that we’ve learned from our history and experience that we might want to take a closer look at,'” Haney says.

Sometimes, you may have to make some adjustments to get approved. For example, if you already have several open accounts with a particular bank, the bank may not be comfortable extending you more credit. However, closing an existing account or transferring an existing credit limit over to the new card may be options.

3. Something doesn’t add up

Not only did you get a message that the bank needs more time, but you got a request to send in documentation verifying your address and Social Security number. That probably means the bank suspects fraud – no offense.

“There are common things banks see when someone is trying to open up an account under somebody else’s identity,” Haney says. “There’s just something about the combination of factors on the credit report that smells a little fishy. So first, they’ll kick [the application] into a queue and, second, they’ll ask for some additional information so they can verify who completed the online application.”
Faxing in proof of where you live and who you are can be time consuming – but it’s better to have the bank question you before approval than allow thieves to open cards in your name, Haney points out.

So why does the bank think you may be a fraudster? Sometimes, it involves the address.

“The most common thing that identity thieves do is they’re going to change the address on the account,” Haney says, so that the physical card is delivered to them and not to you.

Perhaps you just moved, and that’s why the address on your application doesn’t match the one on your other accounts – but the bank doesn’t know that. PO boxes may also prompt scrutiny, as may military addresses (frequent transfers mean frequent turnover of access to mailboxes), Haney says.

But there are more complicated factors at play. Credit issuers don’t report information perfectly, and the credit bureaus are not perfect at assigning information the correct person. As a result, the report that gets pulled for an applicant may have information that conflicts with other information, data from two different people entirely or transpositions of Social Security numbers and street addresses. Name changes after marriage and family members with shared names may further compromise the integrity of the data the bank receives.

In any case, the information doesn’t add up, and the bank doesn’t know if it’s just a data-reporting snafu or fraud.

“That’s just the nature of the business,” Haney says. “The banks, when they encounter those situations will say, ‘Hold on, there’s conflicting information here. We’re not really confident about this particular report, so let’s take a closer look.'”

These kinds of data anomalies also may explain why you’re instantly approved by one issuer and then punted to manual review by another the same day; the former could be pulling from a credit bureau that has cleaner data for you.

4. You’re on an app spree

Your intentions may be innocent when you apply for several cards in quick succession. But banks have seen too much.

“Think about it this way,” Haney says. “If someone had stolen this person’s identity, what do you think they’re going to do? If there are a bunch of inquiries appearing on someone’s file in a very short period of time in combination with other [data] mismatches, that’s clearly a fraud risk.”

What to do while you’re in manual review

Promptly provide all the information the issuer asks for. If you are asked to wait seven to 10 days with no request for additional documentation, you might try calling and asking why your application is being held up. Often however, the issuer won’t be able to give you an answer until an analyst has had time to perform a review. So sit tight. And if you’re rejected, you can always try the reconsideration line.

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