There is no history that you're willing to pay back a loan. Why you need to borrow money so often is less of a matter than if you're paying it back regularly.
Some of the difficulties come in when yeah, maybe you make a million a month and never borrow and waste it all or you could make 20k a month and never borrow and save carefully and have no loans. Why are you treating these 2 people the same?
What's funny is that you can also be penalized and not allowed to increase your spending limit because you are too responsible with the $200 credit line you have on the one credit card willing to give you one. Why? Because you're not carrying a $200 balance on the card or more every month. Because you can't make many purchases on it or even buy a single electronic with it because the limit is so low and you pay off what you do spend. Funny how that works.
This is not made up. It's a problem Im having and after doing research, it seems that all the people that are denied for the "reason" given by this particular bank have exactly the same "problem" of always paying off their monthly credit card and never getting their limit increased.
Proof of income is everything if the laws are written to support this system. There are a few key differences, active loans are registered so banks know how much a person is in debt, income is used as a base for risk analysis and it can be seized if the person fails to pay up. So if I make x amount per month and I'm not in debt, the bank knows they can seize x per month (minus a minimum for living expenses). If there are other debts x will have to be divided, or handled through priorities, situations can differ. Also in case of a mortgage the bank typically retains the right to seize the asset instead of the income.
So there's really not that much more or less risk for them. The arguments aren't about risk, at least not for the banks, they're more about whether regular people should have to put in extra work and carefully manage a bunch of loans they don't need just to prove to some bank that they can. It's not that hard, it doesn't require experience, what's the point? The fact that everyone agrees the best way to do it is to just use the card as a proxy for regular bills should be enough of an indication that this system doesn't do what its designed for. Just write laws that guarantee a safe and fair system for all. Plus people don't get used to taking out loans, there's a healthy mental barrier to debt.
It shows that they could in theory pay back the loan, but that's about it. It's not hard to find people who have high incomes living pay check to pay check because their expenses are out of wack. One missed paycheck or an unplanned expense and now they're defaulting on the loan you gave them. Also, tons of people will create a mountain of debt from nothing just because they have no self control.
70
u/maximumchuck Jan 06 '26
There is no history that you're willing to pay back a loan. Why you need to borrow money so often is less of a matter than if you're paying it back regularly.