Savers the most secure credit are discriminated against in lending | General financial discussion | Discussion forum

I haven't applied for mortgage in many decades, but, if I were a banker , and you came to me and said you needed a mortgage even though you had the money in a savings account, I would certainly want to know why you wanted to pay me a higher rate than you were getting at on the savings account. The interest income is NOT more reliable than employment income. You could decide to spend it all on lottery tickets or pay off your gambling debts with it tomorrow.
Loan denied - unless, of course, you want to give me that million in collateral!

I'm not sure about this but I heard that the credit bureaus don't give high credit ratings to people who don't have much of a borrowing history.

I learned this lesson as a young adult when I applied for a loan and was told I didn't have a credit history because I paid for everything in cash up to that point.

Am I making sense?

I am not sure if I am an exception to common rule or not, but I've got my first mortgage, from Scotiabank, before I had credit card, car lease/finance, line of credit or loan of any kind. I was not a big fan of credit, then.

All I could show Scotiabank was my T4 with employment income.

I paid less than 10% of house price with down payment, and that was almost all money I had at that time.
Scotiabank gave me 1% discount off their posted fixed mortgage rate of that time.

Old good times, right? Yes, I know.

Could you not just use the same bank to set up paying for the house in full and then getting a HEloc for 700k or whatever
That gives the bank the protection they want and you get access to your play money for cheap interest should it be needed

AllanB said
Ya, isn't that nuts someone who loads up on debt is more valued than someone who doesn't.  

I think it would be more accurate to say, "someone who loads up on debt [and proves his ability to handle/re-pay it] is more valued than someone who doesn't"

COIN: You do realize, don't you, that those "pre-approved" credit cards AREN'T pre-approved? They are just sales tools. And I know a great many people - a lot of them bank employees - who made those applications, were rejected AND GOT THEIR CREDIT SCORES DINGED!

(Of course, if you don't APPLY for any of those fake "pre-approvals," there will be no credit rating hit.)

And remember that credit you apply for usually comes with a lower interest rate (if you ever carry a balance) than credit that comes begging to you. The marketing people get rewards for their work, and you pay the price. Just take the T&C from one of those in-store card floggers or telemarketers and compare them to what you find in applications directly to the credit granter. It's usually an inferior deal.

SCORES: I never did any borrowing after my student loans were paid off (and back then the government paid the interest until the loan was consolidated) other than my Amex cards - always paid off in full on time - and they tell me my credit score is amazing.

I agree it's pretty silly to carry huge expensive debt when one could pay it off with cheap debt. I used to do all the focus groups I could, and I remember two in particular that were desperate for members:
1. People with lots of cash and over $5000 credit-card debt
2. People even vaguely considering voting Conservative in the 1993 Federal Election when Kim Campbell was Prime Minister.

The HELOC is a very valuable resource, though. I have helped a couple of friends dig themselves out of debt by explaining the process. Alas, one of them seems bent in drinking himself back into it. 🙁
RetirEd

Norman1 said
Even more accurate to say that "someone who pays us interest and fees is more valuable than someone whom we have to pay interest to."  

You nailed it!

Bill said
Not so sure, the prerequisite is that someone who you pay interest to has to first provide you with the funds you can then loan out to make that interest and those fees.  

Fair enough, however, there's much more to be made from those paying interest and fees.

AllanB said
Ya, isn't that nuts someone who loads up on debt is more valued than someone who doesn't.  

You don’t have to load up on debt to get a good rating. Your credit history just needs to be long and well managed. My dad got me a credit card, from his bank, at age 15 or something. It only had $500 limit and he told me to pay the whole statement every month. It builds your rating without loading up on debt!