FICO scores ‘minimally affected’ by credit line cuts

The credit-card companies’ erratic behavior over the past year — slashing credit limits, abruptly canceling accounts, sometimes without even notifying the cardholder — has apparently had a minimal effect on most consumers’ credit scores.

That’s according to a new study by FICO, the Minneapolis company that calculates the FICO credit score, which is used by banks and other lenders to judge borrowers’ trustworthiness.

“Our study suggests that lenders are using a scalpel and not a hatchet to trim their revolving credit exposure and meet their requirements for regulatory capital,” FICO CEO Mark Greene said in a press release.

The study found 33 million U.S. cardholders had their available credit reduced between October 2008 and April 2009. Of those, 24 million had their credit lines cut, despite no new signs of risk during the period.

About 8.5 million people saw their FICO score decrease as a result of shrinking credit limits, while the rest saw no change or actually saw an increase from the cut. The typical score decrease was less than 20 points, the company said.

Comments (1)

  1. Submitted by Frank Fitton on 08/21/2009 - 11:17 am.

    I don’t really buy FICO’s claims that people’s credit scores weren’t really hurt by the vast number of credit limit cuts. Even if you don’t use the card or rarely use the card,a limit cut will still affect your amount of available credit which is a key component of your credit score.

    All this stuff has just been the credit card companies pre-reaction to the legislation that is being put in. Their gonna get their money no matter what. Its in their best interest for people to have lower credit scores. Its going to be harder for them to raise your rate, so they have to make that intial rate as high as possible.

    I think the credit card companies greed is holding the country back from emerging from this recession. Check out my blog about this situation at…. http://www.thedebtgazette.com/2009/08/58-million-credit-limits-cut-in-past-year/

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