Why Banks Do Not Lend On Certain Loans That Appear Conservative - Part 1

Ever wonder why banks shy away from loans that appear to be relatively conservative?

There are numerous reasons banks avoid making loans that, in general, one would think have a high likelihood of being paying back. According to a banker who works for a well known bank, during the mortgage crisis of almost a decade ago, one thread seem to run through all of the bad loans on the bank's books; late payments on even the smallest of items, such as a department store credit card. This type of information led banks to steer away from otherwise good borrowers (after the mortgage meltdown), since the banks did not want to have borrowers who tended to be late or default on mortgages. Thus, a borrower who never missed a mortgage payment but may have been late on a small credit card was seen as a bigger risk for a future default on a mortgage should there be instability in the economy.