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Is is possible or even common that banks share information about their customers with each other directly?

Specifically, when one applies for a credit card, often there are questions about existing credit cards in other banks. Would it be possible for banks to verify the provided information?

Even more specifically, say I apply for a credit card with a $10,000 limit and tell the bank that I have a $20,000 credit card with another bank. They call me and tell then they would approve my application on the condition that I lower the limit on the other card down to $10,000 (or even close the card altogether). Would they be able to verify that I did so?

I guess the answer would depend on the market so let's assume Australia/New Zealand, but it would be also interesting to hear of the USA practices.

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    I'll post this as a comment because I'm uncertain about this, but I'm pretty sure this information is available through a check with your credit bureau. – ApplePie May 15 '18 at 23:27
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In the United States, the banks would share the data with the credit bureaus. The credit bureaus would then share the information with anyone who did a credit check. Credit reports include information about

  • Your current and former addresses.
  • Your loan accounts that were reported to them.
    • Date that the account was opened.
    • A rough idea of current balances.
    • Credit limits.
    • Payment history.
  • Public records and collections information.

According to the Office of the Australian Information Commissioner, Australia has credit bureaus as well. They use similar terminology to the US, suggesting that they work similarly. Equifax and Experian do business in both countries.

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It is unlikely that a credit card company or bank will demand that you reduce the $20,000 credit limit on a card that has been issued by another institution before they will issue you a credit card with a $10,000 limit. After all, you could always ask the old bank to re-instate the previous limit of $20,000 as soon as you have received the new card. The only reason that the scenario that you envision might ever occur -- the new bank demanding that you ask the other bank to reduce your credit limit -- would be that the new bank's assessment of your credit-worthiness is $20,000 (which amount of credit you already have access to) and that it would be risky to extend more credit to you. Not going to happen. In such a case, it is far more likely that your application for a new credit card will be declined on the grounds that you don't meet their underwriting standards, or that you will be offered a card with, say, only a $5000 or $2000 credit limit, and possibly with a higher rate of interest on balances because you are a poor credit risk. If you do get a card with a low limit and you maintain a good record of timely payment in full of your balances on both cards, the new bank might bump your limit up to $10,000 at a later date, whereas if you miss payments and your monthly balance on that other card is slowly increasing (suggesting that you are living beyond your means), the new bank will keep you at that low limit and give itself a self-congratulatory hug for not extending more credit to you.

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