Study: 16% of Americans saw credit card limits reduced
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More than 30 million cardholders had their credit limit reduced between April and October last year, according to a new study.
But most of the adjustments were not made for the traditional reason: risky behavior like making late payments or having accounts go to collections.
About 22 million card holders, or 11% of American consumers, saw their credit limits lowered despite having no recent dicey behavior or actions such as negative public records added to their credit reports, according to Fair Isaac Corp. The Minnesota-based FICO score developer produces the formula used by most major credit score agencies.
The median FICO score for this group was 768 in April but then rose to 770 by October. Lenders reduced this group’s credit limits by an average of $2,200, a relatively small percentage of the $44,000 available during the six-month time frame.
Most of these borrowers had inactive or low-balance card accounts and generally had few missed payments and a long credit history. Of all U.S. consumers, 80% had no ‘risk trigger’ posted to their credit reports during the study period.
Just 5% of consumers, or 10 million cardholders, had limits dropped because of shaky credit activity. According to Fair Isaac, consumers who use a large percentage of available credit are much more likely to default on a credit obligation.
Since credit card issuers began scaling back credit availability in early 2008, 16% of Americans have been affected, Fair Isaac said.
— Tiffany Hsu
