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"Too Little" Credit Shouldn't Be a Bad Thing--Even Though It Is

People with credit cards are being punished by higher rates, or even closings, for "not having alternate sources of credit." Forget about "unfair." That's a terrible criterion--for the banks.

That means, "there aren't enough other suckers to share the pain in case you go belly up."

As a lender, I would look at total debt (to income, assets, etc.) That is the real determinant of default. All other things, equal, the more lenders, the more total debt, meaning the greater chance of default.

If someone has little total debt because I'm their only lender, that's great. That would mean that I have a relatively good credit ALL TO MYSELF. Fewer "other relationships" is a GOOD thing for a partner in the financial, as well as the social, sense. The last thing I'd want is to see my best customers "date" (owe a bunch of money to) others.

But banks don't seem to mind heavy indebtedness, as long as the burden is being shared by others. At some level, they all think they'll be paid/collect first,. And others will hold the bag. In other words, their message to the customer is: "it's not whether you win or lose, it's how you play the game."

I don't want my customers to "play the game." I want them to win. By not losing.