Being denied for having too many revolving accounts?

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daniel2304
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Being denied for having too many revolving accounts?

Postby daniel2304 » Thu Dec 19, 2013 9:24 pm

I heard someone the other day told me that having too many credit cards might be the reason for lenders to decline your installment loan such as student loan, car loan or a mortgage. Is it true?

P/S: I didn't check spelling the title, it should be "too many" instead of "to". Any mod can help me to fix it, please? I can't do it myself.
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MemberSince99
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Postby MemberSince99 » Thu Dec 19, 2013 11:56 pm

The only thing I've ever heard of in terms of too many cards would be a mortgage. I have read stories that they made people close a card. I've never heard anything like that from student or auto loans.


I think that whole thing is WAY overblown. Just look at how many cards some people have in their signatures.

cashback
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Postby cashback » Fri Dec 20, 2013 12:09 am

You can never have too many credit cards, unless they are all maxed out.
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takeshi
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Postby takeshi » Fri Dec 20, 2013 8:07 am

It's certainly possible but it all depends on one's credit, the loan underwriting criteria, etc. As always, it's not just a single factor at play. There's isn't an X for number of cards that is "too many" in all cases.

cashback wrote:You can never have too many credit cards, unless they are all maxed out.

Too many is a subjective matter. For some, 1 card is too many. For others it's a larger number. It's not just a matter of whether they're maxed out or not but what the individual can reasonably manage.

daniel2304
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Postby daniel2304 » Fri Dec 20, 2013 9:34 am

Some article I read explained that although you pay off your balance full each month, you are still able to charge max out every card the day after your loan approved so they might decline your application. I honestly concern about this a lot because I want to buy houses and invest in real estate too
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Obi-dan
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Postby Obi-dan » Fri Dec 20, 2013 11:52 am

When I worked at the bank I saw one client get declined for a loan due to "too much open credit." When I inquired with the underwriters they replied the fear was should all the credit get maxed out that would create too high of a debt to income ratio for the client to pay off everything and of course all creditors fear they'll be the one left out when someone starts making choices on what and want not to pay. But it was just one loan out of the thousands I did. And as Takeshi pointed out, every lender has their own lending criteria and set of factors they use.
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MemberSince99
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Postby MemberSince99 » Fri Dec 20, 2013 11:55 am

How much credit did they have open, as compared to income? I'd be curious to know what spooks them.

Obi-dan
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Postby Obi-dan » Fri Dec 20, 2013 12:15 pm

MemberSince99 wrote:How much credit did they have open, as compared to income? I'd be curious to know what spooks them.


I don't remember specifics but I want to say the dude made around $250k and had about $500k spread over 20+ cards and a balance of under $10k on one of them. He was trying to do a home equity loan. They requested he close about 1/2 his cards to approve the loan. I don't know what he ended up doing. He was pretty pissed. Whatever he did, he did it with another bank.
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MemberSince99
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Postby MemberSince99 » Fri Dec 20, 2013 12:49 pm

You know, it's hard to blame him. I think I would have taken the opposite approach and tried to convince him to switch more of his business to me. He sounds like a prime customer and just walked out the door and went and did his business with someone else. Doesn't really make sense to me why they would let that happen.

Obi-dan
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Postby Obi-dan » Fri Dec 20, 2013 1:54 pm

MemberSince99 wrote:I think I would have taken the opposite approach and tried to convince him to switch more of his business to me.


So I was a retail banker, I never made credit decisions but underwriters don't always want all of a borrowers loans or lines of credit. At the end of the day banking is a lot about limiting exposure to risk. If bank A is carrying all you debt and you go bankrupt Bank A can really be screwed. But if your credit is spread about over several banks then bank A takes less risk should you default.

That said, when in comes to deposits, banks do not like to see that spread around and they would do just about anything to get you to bring all your money over.
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