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I had a Citi Mastercard for several years. About a year ago, I hit a couple bumps in the road and ended up having to settle with a collection agency on the account and it now shows up on my credit report as 'Account closed by issuer' (or something similar). In this past year, I've repaired my FICO score a bit and got current on all my other accounts. Credit Sesame is telling me I have "very Good" odds of being approved for a new Mastercard, also from Citi. I obviously don't want the ding from a hard inquiry AND get declined, so I'm wary.

Can the fact that I have a previous account with Citi closed by them impact my chances of approval (any more so than the pure fact that the account was closed by issuer... regardless of who the issuer was) for a new card with them?

** EDIT **

Based on @TripeHound's comment below, it sounds like your past history with a given bank does in fact become a factor in the approval/denial process. I guess a simplified version of my question would be:

Having an account closed by the issuer definitely works against you in the approval/denial process. Do banks "hold a grudge"? Does it work against you even more when applying for a different card from a bank that has closed a previous account?

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    Bit too vague to make an answer, but as I understand it, banks use the credit report as part of their decision making process. A bank that also has their own "history" of a customer is more than likely to take that history into account. So I could see the decision from Citi might be different than from another bank, but whether it's more likely to be positive or negative would be hard to say... – TripeHound Dec 16 '19 at 9:18
  • @TripeHound - thanks. That's pretty much what I was looking for... whether ALL banks follow the same "formula" (solely based on your credit report) for approval/denial or if they can factor in their own criteria, that would surely include history from past customers. If anyone has any info/insight or hard data on the non-credit-report factors taken into consideration by the banks in making their decisions, that would be great. – Daveh0 Dec 16 '19 at 10:55
  • I don't have "hard data" (and people that do might not be allowed to say), but I can see "it" (approaching a bank you've previously had problems with) working either way. A bank you've not dealt with cannot see the finer details, only "account closed by issuer", and have to base their decision on that alone. Being able to see the full details, the bank that closed the account might decide "once bitten, twice shy" and be more likely to turn you down, but they might see the problem was a "blimp" in an otherwise well-maintained account and be willing to give you another chance. – TripeHound Dec 18 '19 at 14:40
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You basically asked,

Do banks "hold a grudge"?

Many banks do indeed "hold a grudge" in the sense of using data about prior relationships with you to make decisions about potential new business.

Banks retain customer information about closed business. This is required by regulators to a certain extent, but it also helps banks track customers who have caused them losses. Many banks will indeed "blacklist" customers who have caused losses, and many lending platforms have functionality that automatically flags members who have caused losses in the past. Sometimes this process includes a threshold (i.e. the loss has to be more than $500) or it acts as a soft factor (the loss simply means that the credit application will be flagged for manual review, and the info on the loss is presented to the human making the decision).

There is also some variability around time frames - some banks will only flag a customer for a certain number of years, whereas others will keep the flag "permanently" (in quotes because it may be intended to be permanent, but as technology changes and data is converted/archived over times, who knows if it will literally be forever).

In a comment, you got to the root of your question when you asked,

That's pretty much what I was looking for... whether ALL banks follow the same "formula" (solely based on your credit report) for approval/denial or if they can factor in their own criteria, that would surely include history from past customers.

The answer to that is certainly that banks do not all follow the same formula. Further, the formula will vary significantly even within a specific institution, depending on the customer and the product they're seeking. Small, less-risky lending products are almost always approved or denied by software, based on a pretty short list of factors (self-reported income, credit score, etc).

Larger and riskier products are more likely to be approved by humans, and almost always include some degree of subjectivity. For instance, if you're applying for a car loan, the lender will likely look at the details on your credit report for any car loan that's listed, to see how you behave with respect to car loans. So - even if you have an okay credit score, and plenty of income, you may still have problems getting the loan if you were consistently late on paying your last car loan. It might not even matter if that other car loan was with a different lender or not.

Unfortunately, the variability in practices makes it hard to provide an answer for a specific product and situation, and essentially, banks can (and will) use just about any data they have in order to make decisions, as long as the data isn't illegal to use for decision making (i.e. discriminatory things like what race you identify as).

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If a bank has lost money because of you, or they had trouble collecting what they were owed, then they will 100% factor that into their decision process. They may reject you without needing to look at your recent credit history.

Changing the flavor of card will not help you if the bank considers you too risky. I assume that if they wanted you as a customer they could allow you to get a secured credit card, but then they would be concerned that you will go over the limit putting their money a risk.

If anyone has any info/insight or hard data on the non-credit-report factors taken into consideration by the banks in making their decisions, that would be great.

I don't have hard data, but remember that the purpose of the credit report/score aspect of their approval process is to get a sense of the customer from vendors outside the banks view of your history. If the history they already know is bad they have no reason to even consider the outside information.

  • +1 - I totally get your 1st paragraph. And that's kind of where my "do banks hold a grudge" question comes in. Because of that account closure, SOME bank lost money. Does the fact that it was Citi who lost the money and not, say, Chase weigh more heavily on Citi's decision than it would on Chase's decision (if it were a chase card for which I was applying)? – Daveh0 Dec 16 '19 at 12:32

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