When and why did banks and cc company's start automatically rejecting people with bankruptcy's?

I remember that it used to be the conventional wisdom that people with a bankruptcy where considered a better credit risk because they had no debt and where unable to file bankruptcy again for 7 years. In my experience this was true as I had good credit but not very much of it and I had a hard time getting a credit card while people I knew with bankruptcy’s had no problem getting one.

Now it is much harder to declare bankruptcy and yet most applications you fill out have some sort of statement at the top that says something to the effect of ‘if you have a bankruptcy on your credit report don’t even bother applying’

I know credit is much harder to get in general nowadays but why such a drastic change in the view towards bankruptcy?

I can’t give you a factual answer, but financial institutions have been tightening their credit requirements for some years now. Perhaps you’ve heard of this?

And just because you can’t file bankruptcy again quickly doesn’t mean you will pay them.

I would bet that most people who defaulted on unsecured credit----like credit cards----never filed bankruptcy. They just stopped paying, and let their credit rating suffer.

The fact that you can’t file bankruptcy is of no consolation to the credit issuer if you default. He’s still not getting paid. And, as with many creditors who have little assets to seize, credit card debt is usually never recovered.

Yes, I mentioned it in the OP :rolleyes: . Maybe I wasn’t clear - It used to be bankruptcy was better than limited good credit, now it seems like limited good credit is better than good credit with a bankruptcy. Why?

I didn’t want to make this a personal thing but - I have a bankruptcy from 6 years ago. Since then my credit is perfect including several large loans paid off over time. I have zero debt and a decent amount of money in my savings account. There are plenty of credit cards that my credit score is high enough to get and yet I am automatically excluded because of a bankruptcy in my history.

I have been in the credit card business for 9 years.

(waits for jeers to die down)

I don’t think things have changed that much during this time, or for several years before that. We’ve never allowed folks with a bankruptcy on their credit report to get a standard product. As someone already said, just because you can’t declare bankruptcy again doesn’t mean you are going to keep paying us. The majority of our charge offs don’t come from bankruptcies, but from people who just stop paying.

We’ve always had some specialty products for folks with damaged credit (secured, partially secured, etc.), and some of those have slowed down since 2008, but they are probably not what you want anyway.

OP, you can’t get a credit card AT ALL, or you just can’t get the double platinum super duper rewards card? My neighbor is 2 1/2 years out of bankruptcy and got a card with a $300 limit and a $69 annual fee. Basically, he is paying $70/yr for the privilege of rebuilding his credit. Baby steps.

Please don’t take this as personally directed at you, but the old meme about how a bankrupt was a good risk because he had no more debt is absurd. Of course he has no more debt. He stiffed all of his creditors! It’s like saying the alcoholic is getting better because there is no more liquor in his house (because he drank it all).

The reasons for filing bankruptcy can be on a continuum from total irresponsibility to a freak of nature that was totally not the debtors fault. However, a potential creditor doesn’t know the applicant personally and only has the fact that previous creditors got screwed. That would make anyone leery.

Again, bankruptcy is a good option to have and I mean no personal judgments. Just try looking at it from the creditor’s side.

Thank you - So you are saying everything has gotten harder and it is just my perception that things have changed regarding a history of bankruptcy? The main thing that makes me feel like there are special rules regarding bankruptcy (that there where not in the past) is that my score is high enough to qualify for many credit cards according to several websites yet I am excluded specifically because of my bankruptcy. I assume my credit score factors in my bankruptcy so I don’t see why there should be a separate spot/rule for it. I never remember seeing a statement on credit applications saying ‘don’t bother applying if you have a bankruptcy’ in the past.

For what it’s worth I would be a bad credit card customer not because of risk of default but because I never carry a balance. I didn’t mention that that I make a decent income and the one credit card I have has a limit of less than my take home pay for one week. I try to use it to build my credit history but with the limit so low it is an annoyance to keep such a close eye on the balance.

And yes I would like the double platinum super duper rewards card :). Or maybe just the rewards card and a limit that I couldn’t accidentally go over with less than 1/2 of my monthly expenses.

How about we change your analogy to an alcoholic is less likely to drink because he is being forced to take antabuse. :wink: