Creditworthy?

The credit rating system used in the United States is really tough on recent immigrants (like me).

Now let me begin by saying that I recognize how important this system is to oiling the wheels of the US consumer economy. Businesses can assess the credit worthiness of their customers with remarkably low transaction costs (both in terms of dollars and in terms of time).

So what's the problem? Well it is simply that the system treats you as if you didn't exist before you emigrated to the United States. It doesn't matter where from. It could be from the poorest third world country which has no reliable financial institutions or credit records, or it could be from an advanced country like Australia as it was in my case.

Where does all this lead? It leads to me having a discussion like this with my bank:

Me: "I'd like a credit card."
Bank: "Sure. We just need to get some background information. Who do you work for and for how long?"
Me: "I've worked for a large US company for the last five years."
Bank: "OK. How much do you make?"
Me: "Six figures."
Bank: "Great. Do you have any assets."
Me: "Sure. I have clear title to my condo. I have clear title to my brand new car. And as you can see, I have a very substantial balance in my checking account here at your bank."
Bank: "Any debts?"
Me: "None."
Bank: "Wonderful! Now the computer will perform a credit check. It will only take a moment. Ok, here we go. The answer is NO."

So who is a fault here? I'm not a customer of the credit rating agencies (Equifax, Experian and TransUnion) so they don't owe me anything. But my bank is their customer and and these guys have served them very poorly by telling them not to give a credit card to the most credit worthy customer they've probably seen in months.

We live in a world where high income individuals are increasingly mobile, and not surprisingly many emigrate to the United States where they are all denied credit. How big is the problem? Well according to US government immigration statistics, even in 2003 (which was 25% down on previous years due to security screening delays) nearly 100,000 people were admitted for permanent residence on the basis of professional skills preference - people likely to fall into the high income category. But this is permanent residence only. It doesn't include for example the foreign executive who is transferred temporarily to the US, or the foreign MBA graduate who is sponsored for an employment visa by a Wall St firm. So it's likely that 200,000 or more people on substantial incomes are being denied credit every year!

And what about Wells Fargo my bank? It's great to have efficient, cost-effective and highly automated processes. But computers are dumb. Really dumb. Sometimes, just sometimes, you need a living, breathing, thinking human being to get involved. What should have happened is someone should have said 'This doesn't make sense. Let's dig a little deeper. Ok, you've recently moved from Australia. Of course you don't have a credit history. But obviously you're very credit worthy. Of course we'll give you a credit card.'

I'm a great beleiver in our capitalist system, but there's clearly some signficant market failure here. Looks like a perfect opportunity for a venture capitalist to start a niche bank targeting this group. Just remember you got the idea here!