Gone are the days of lengthy credit card approvals. Applicants used to wait days or even weeks to hear back from a credit card provider, but most applications are now approved or denied within the same day.
Alliant Credit Union recently announced a change in their decision-making strategies which cuts credit card application approvals to less 30 minutes. While this improves efficiency for the credit union, it may not be ideal for the customer.
Speedy loan and credit card approvals typically rely on automated systems. A program will assess a person’s credit score, payment history and existing credit accounts to determine the risk level of the applicant. High-risk applicants are denied, and low-risk applicants are approved.
But automated systems do not accommodate the “what-ifs” of an applicant. What if a person’s credit was destroyed because of a costly car accident, where bills went unpaid for months but now the person is financially back on track? What if the applicant’s identity was stolen? What if a final payment on a credit card has not posted to the credit bureau?
These factors were once assessed during credit approvals. Applicants had the opportunity to plead their case before a creditor could make a final determination. With today’s automated systems, applicants are typically assessed on numbers and nothing more.
On the flip side, automated credit card approvals do improve efficiencies for financial institutions, which decrease their costs. This typically translates to lower fees for approved applicants. Furthermore, excessive lending was one of the contributors in the Great Recession. Lenders focused on the “what-ifs” so much that they lent money to those who could not repay it.
If you are instantly denied a credit card, you should receive a letter in the mail explaining the reasons for the decision. Read the letter carefully and see what you can do to improve your credit in the future. If your debt to income ratio is too high, pay down some of your debts. If you have too many credit inquiries, wait at least six months to a year before applying for a new card. By working on areas that need improvement, you can increase your chances of being on the “approved” side of automated credit card decisions.