With technology as advanced as it is today, we should touch on the fact that banks keep detailed profiles on each client. The quality of the profile information depends on the type of internal computer infrastructure that exists for that bank. Almost all banks in the United States have a global presence, and a strong computer network infrastructure. They have robust dedicated in-house servers for security purposes. Their databases are everything. This also means that they likely have a detailed history of all the applications you’ve made to them for credit over the years, along with each lender notes and comments electronically saved and accessible to any employee of that bank, in any branch around the world.

Though your bank has a file for you, it is not accessible by competitive banks or financial lending institutions. Many people do not understand this because they are confusing the information the credit bureaus share any information that the banks don’t share. No bank can provide or discuss your personal affairs with another bank. In fact, they can’t say anything to another client about your affairs, and if they do they are in violation of your rights to client privacy like a lawyer/client and could be sued for doing so. They can put a collection claim on your credit Bureau report to tip off other would be lenders when you’re not being or acting responsible, but they can’t call other banks to tell them they are having a bad experience with you and your loan payments. Could you imagine the different loan officers and bank managers sitting around for a Sunday barbecue discussing all of the different clients who have back credit and have defaulted on their mortgage payments?

Looking at Your File from your Primary Bank’s Perspective

This client file has a detailed history of each application you have made in the past for credit through them. It may surprise you to learn that the first loan you apply for is still on file, even if it was declined. Each mortgage application decline for approved is shown. Each refinance application, if you refinance your home before, and each credit card applications you’ve completed at your bank is also on record.

The electronic application was developed to not only provide lenders with a historical picture for each client, but to centralize the approval and information process while moving more toward a paperless environment and a centralized records and management system. Whether you call the bank’s 1-800-number, walk into a branch or access their Internet website to complete an application, they all are saved the same way and on the same database. They are then routed to the same credit granting department. This is to say that it doesn’t matter what medium you choose to apply, the same people review your application for credit in most preferred banks.

Let’s assume that you’ve called the telephone application center’s phone number. You’ve answered all their questions, and while you’re on the phone they softly decline you by saying, “your application for credit has been declined for the following reason: low income, low net worth, poor credit, etc.” You feel that the person on the phone hasn’t taken your application fairly, or doesn’t understand something you’re trying to explain that may change things. They will likely refute you or refer you to speak to your home branch and to make a personal appointment with a lender.

There are a few reasons a call center may say this to you. They are measured each day on the amount of applications they can complete over the phone, how many actually get approved, and how long it takes them to complete each application. If the call center phone representative begins to suspect that they won’t be able to make your application work quickly, they will abandon their efforts and refer you to your branch to work it out. You then hang up, and they go to their next caller in their search to complete another application.

When you visit your home branch and its lender, they can electronically access, to review the application you completed over the phone, and can quickly review the notes the call center representative made to help them identify the weakness of the application. They will be able to make their own assessment to the facts, capture from your client interview new or missing details and resubmit your application to the same credit granting group that reviewed your application the first time. The only difference between going into a branch to complete your application, and doing it over the phone is that you are right across the desk of the person trying to help you. You are connected in a far different way and able to communicate using your tone of voice, body language, eyes, and facial expressions. You can address head-on any issue the lender may need to overcome to make your application work, and you feel a sense of community with your bank while going through the process that a telephone representative or Internet platform application can’t interpret.

It is easier to lobby for support when you’re visible; the lender is more likely to help position your information favorably because you’re sitting right there in front of them. They can evaluate what your presence and actions mean. They also can prepare an amendment to the application the phone representative completed in the first place.

Now don’t be misled! The lender sitting across from you has goals to meet and sales targets too, and isn’t likely to be an application again and again if they know that it won’t work. Another reason why it is so important to come prepared (and I recommend actually completing the application at a branch, not a call center or an Internet website) so the lender can submit a solid, clear and simple application to their credit granting department the first time. This avoids credit departments asking lender, “why is this client applying on the phone, faxing a paper application and now seeing you in person? Don’t they know we’re going to decline them again?”

If you like rules to live by, then these are the rules to use when seeking a loan so your chances of being approved or better;

One) never rush into borrowing and signing papers.
Two) make your first effort the best.
Three) be prepared and know your financial readiness before applying.
Four) have a firm grasp on your debts and repayment history information.

Alternate Delivery Applications (usually Credit Cards)

What sometimes doesn’t show on your file is an application for a credit card through an alternate delivery process. Alternate delivery is a paper-based application you’ve picked up through a brochure your bank puts out that you fax to a centralized location for processing. Usually these will show up in your mailbox, and by mailbox I mean the real one attached to the front of your house. Sometimes a mail out preapproval application is sent to your home address by your financial institution that you been accepted. As you did not complete the application in person in a branch, it is likely the only evidence they have is the paper copy of your manual application form. Though these are reduced and stored on a piece of film, they are not electronically accessible by any lender in any city. They would need to order a copy of this information from their records management department and wait a few days for a copy to arrive. As this adds little value while completing your new credit application, and takes time to request, lenders don’t usually require this historical information. Having said all that, they do review your prior applications for credit while completing your new application. This allows them to see if your job stability is all you say it is, along with your income levels, marital status and current address.

Does Your Bank Know Too Much?

Is it possible for your bank to know too much about you, given they have had you for a long time as their client? Consider for the moment that you walked down the street to the other bank, completed their application with the same information as your bank has, and were approved. How could this happen? Let’s look at Mr. Roberts again.

It turns out that Mr. Roberts quit his job the previous month, and when he was asked to provide his income tax slip from the IRS with his notice of assessment the lender assumed he was still employed. After all Mr. Roberts came prepared with a copy of his credit Bureau report from all three major credit bureaus, all his income verification and knew the rates of loans currently being offered. He was well-prepared, and it was assumed he was still working with the same company. Mr. Roberts had since accepted a new job with a different company doing the same thing as before, and was confident he would be able to pay for the new loan before he decided to apply.

The lender at this financial institution didn’t ask any further questions about his employment stability (which they should have) and processes application. Mr. Roberts would have answered the truth had the lender required more information about his employment, and perhaps being required at that time to provide additional information regarding his new job.

Well, the lender at his bank had known him for 15 years, and also knew the manager of the company Mr. Roberts worked for. While out on a business lunch the manager of the company mentioned to that lender that Mr. Roberts just quit one day, and never came back. With that extra bit of privileged information, the bank manager declined to process Mr. Roberts application thinking he was unemployed. The bank manager didn’t know he had a new job, and that his probationary period was over in two months. The bank down the street didn’t know Mr. Roberts for his employer, and we’re not aware of the same privileged information, and therefore it was not used in their assessment of the risk in lending to him. They took his application, keyed in the information they extracted from Mr. Roberts prepared information package and positioned it for approval.

Continued in the Carol’s Borrowing Series Category of Clf.