The big story for the last two years has been the credit crunch.   Once people started defaulting on their mortgages in 2008, the market for mortgage back securities tanked.   Then the banks were bailed out, and by that time the whole credit market was spooked.    That caused the economy to tank and unemployment to skyrocket, making people who were once considered a good credit risk seem suddenly uncertain.

For some time now, I have read many reports from people who had never been turned down for a credit card  getting their application rejected for the first time.   Earlier this week, the Frugal Travel Guy noted that he is seeing anecdotal evidence that credit is now easing. Keep in mind that his game is extracting as many sign up bonuses as possible from various credit card companies.    By sending out so many applications, you get a good sense as to when credit is tight and when credit is loosening.  He writes:

…..card lenders are looking for more customers, but quality customers I’m sure. We saw denials for the SPG card during their big promotion in July for scores in the 680-699 range.

Sign Up Bonuses Rising

What is also interesting is that he and I agree that banks are going after customers with good credit through offering greater sign up bonuses:

And as I predicted months ago the BIG sign up offers are continuing. Expect to see more BIG offers in the near future. Keep your credit score high and only pick the best offers.

It is funny how the banking industry predicted the death of reward cards in the CARD Act debate, yet we are now seeing the opposite happening.    Banks are fleeing risky consumers who rack up debt and are trying harder than ever to entice the “deadbeat” crowd.   These are the people who pay their balance in full and on time every month.   They can be counted on to produce the most merchant fees while representing the lowest risk of default.     As Deadbeats, these cardholders are wisely shopping around for the best possible reward, and a bidding war has erupted.   It is not uncommon to find bonus offers of 50, 75, or even 100,000 airline miles!

Still Struggling?

Over at the New York Times, there is an article about how a particular businesswoman is struggling to get a credit card.  After enduring several paragraphs detailing how she managed to own a business and have a baby, we learn about her difficulty obtaining a new credit card:

Despite the business’s good track record under its prior owners, both of whom also had good credit, Meghan was turned down by every major credit card company out there. …When she asked why, she learned another one of those dirty little secrets: she was told that her credit had been run too many times over the previous three months. In other words, the more she applied to get credit, the worse her chances of obtaining it became because her score kept getting worse.

The moral of the story is not to keep applying for credit cards after you get a rejection.     Every application makes a small, temporary drop in your score.    It also seems that multiple applications have a cumulative effect greater than the sum of the individual ones.    Credit card companies see that you are applying multiple times in a short period, and they figure that you are in some sort of financial crisis.    The article doesn’t say how many times she applied, but it sounds like she did so many times.

Being successful in business, and often in life as well, means trying over and over again until you succeed.   Savvy cardholders know that this kind of persistence does not pay off when it comes to credit cards.


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