Credit Checks Can Cause Issues

in Bank, Credit Cards

It is interesting to see how the dominoes fall  in the financial world, and one of the most entertaining stories I have is from about 25 years ago as my wife and I were looking to buy our first house.

As we shopped for the first Big Cajun Hacienda,  Mrs. C8j and I decided we needed to shop around to get the best mortgage deal, that was possible at the time. At the time interest rates were very high and we were hoping to find as low a locked in rate as we could (it ended up being 12.5% for a five-year term). We spoke to our bank (at the time) Scotiabank but my brother had (at the time) a good deal (in his opinion) with BMO, so I went and spoke to them as well.

Both banks wanted to “pre-approve” me for a mortgage on the basis of my income and such, so they both came back with about the same deal for me, so we were leaning towards Scotiabank (as they were our current bank). Scotiabank also suggested I apply for their Visa card to help with moving expenses and such, and it seemed like a good idea (at the time).

Gift Cards, Cash

So Many Cards so easy to get these days.

The application seemed straight forward, but about 3 weeks later I got a terse, but polite, letter saying that my application for the Visa Card was denied, with no explanation (but thanking me for applying).

I was flaberghasted, insulted and very mad (in my younger days, I was even a bigger hot head than I am now), so I phoned the number on the letter to get an explanation for this serious insult that had been inflicted on my Financial Ego! I spoke to a very patient and nice lady at the Scotiabank Visa help center (I would say she earned her pay that day), and she calmly explained that my “file had been flagged” and that was why I was refused the Visa Card.

“Why was the my file flagged?”, I asked.

The answer was simple, my “credit file” had been accessed twice in the week before my application, which caused the system to kick out my application as high risk. Why did my “credit  file” get accessed? Remember those two pre-approvals? Those two procedures cause the whole system to suddenly view me as a bad credit risk, because people were looking up information on my credit, as simple as that.

Once the patient young lady on the phone and I figured this out, she said she could put through my application, and get me the card in a few days, but I decided not to do that, and decided to go with BMO instead.


This was the first time I had been exposed to the Business of Credit, Mortgages and Banking and it was an eye-opening experience, and from that I have learned to be wary of banks, and to always ask questions about all processes no matter what transpires.

Oh, and isn’t it interesting that I was actually turned down for a credit card? Anybody heard of that these days ?

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{ 9 comments }

{ 9 comments… add one }
  • Edward June 18, 2014, 12:40 PM

    I can understand banks doing this. They don’t want a person to apply for 3 credit cards, a line of credit, a home equity loan, pull out cash advances on all of them, and then run away (for good) to Aruba. I bet this scenario is attempted by someone out there almost daily.
    Funny, I called one company to have my credit limit *decreased*. (What in the holy hell do I need $20,000 on a credit card for?) When told doing that could (somehow) “negatively effect my credit score,” I replied, “Go ahead, negatively effect away! “

    Reply
  • debs June 18, 2014, 6:35 AM

    We have a mortgage up for renewal next March and to be sure we get the lowest possible rate (1.99% sounds good doesn’t it?), I want to do a credit report and score check before hand to make sure all looks good. I’ve been using a strategy of prepaying my mortgage with a .99% interest low rate credit card, and ensuring it is paid before the interest rate increases. I currently have 6K on that card, to be paid by August. I won’t be doing that again for a while because I need to keep my credit limit versus use to less than 25% to ensure my credit rating is not impacted before my mortgage renewal.

    Reply
    • bigcajunman June 18, 2014, 6:52 AM

      1.99% I think I would have given a kidney in 1990 to get that rate!

      Reply
  • Denis June 17, 2014, 2:45 AM

    Decades ago, I also was denied a credit card. I was told that I had an unpaid account at Kmart, and until that was paid, I would not be issued a card. I let that sit for a while, and a few months later I tried again. Denied again, same reason. This time I got active about it and got them to give me the delinquent account number, and said well, if it is my account, there is no reason I cannot have the number. Then I called Kmart’s credit department, and it turned out that they had put someone else’s bad account in my name. Same first name, but different second and third name, but same last name. (I go by my third name as we are all called the same Christian first name). When I figured out that they had the wrong person flagged, I raked them over the coals and got them to immediately advise the credit bureau of the error, AND send me a letter letting me know when they had done this. I ended up getting that credit card.

    These days I only get collection agencies calling for the person who had my phone number before me. I have had the number for 4 years, and I STILL get calls! They have the gall to ask me if I know where he is! I am sure that the phone company gives old phone numbers, (that they put out of use for 6 months between users), to friends of the previous user. At least that is what collections people think! Seems that they sell the bad account every year as I start getting a rash of calls about the same time every year. This year I plan to get their company name and address and send a cease and desist letter, or I am going to own me that company when I sue them.

    Reply
    • bigcajunman June 17, 2014, 5:39 AM

      It does seem like the system could use a few fixes here and there doesn’t it? Or a complete bloody overhaul.

      Reply
  • Holger June 16, 2014, 7:11 PM

    In retrospect it is quite clear what happened: Every hard inquiry (i.e. a potential lender accessing your credit record for the purposes of granting you additional credit) temporarily lowers your credit score.

    Do it often enough and you drop below the credit rating threshold required to get that card. This is why it’s so important to only ask for credit if and when you need it.

    Another gotcha is having a balance of more than 35% of your credit limit on your statement. That also damages your score, even if you pay the full statement balance every month.

    Reply
  • Bernie June 16, 2014, 1:55 PM

    I don’t recall ever hearing of an experience such as the one you encountered with the credit card application. It’s a good thing you took the time to find out why you were rejected!

    As for your mortgage negotiations did you consider using a broker? I used brokers twice for renewing my mortgage. They saved me an enormous amount of interest over the years & didn’t cost anything for their services!

    Reply
    • bigcajunman June 16, 2014, 2:01 PM

      Given it was 25 years ago, and nobody told me about that possibility, no, unfortunately. I think I’d talk to a broker now just to find out what the lowest they could find me (might not use them, but I’d certainly talk to them).

      Reply

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