‘It doesn’t seem fair’: I’m retired and have plenty of money. Why can’t I qualify for a retail credit card?
“I draw from my IRA as needed for household repairs, trips and other larger expenses.”
The issue at hand is that a retired individual with a comfortable financial situation is facing difficulties in qualifying for a retail credit card. This may seem counterintuitive, as one would assume that a person with a steady income, even if it's from an IRA, and sufficient funds would be an attractive candidate for credit card issuers.
However, the reality is that credit card issuers use a complex set of criteria to evaluate applicants, including credit score, income stability, and debt-to-income ratio. In this case, the individual's income from their IRA may not be considered "stable" or "predictable" enough to meet the issuer's requirements. Additionally, the fact that they are drawing from their IRA as needed may be viewed as a form of asset depletion, which could negatively impact their creditworthiness.
As a broker, it's essential to understand that credit card issuers are becoming increasingly cautious in their lending practices, especially for applicants who may not have a traditional employment income. To watch next: expect credit card issuers to continue tightening their underwriting standards, making it more challenging for non-traditional income earners to qualify for credit. It's crucial for individuals in similar situations to review their credit reports, ensure they have a good credit score, and be prepared to provide additional documentation to support their creditworthiness.
Originally reported by marketwatch.com. BrokerNews adds analysis for finance & markets readers.