Credit Card Limit Reductions Impact 16% of the Population According to FICO

A new FICO report on credit data from the second half of 2008, revealed that 16% of the US population had some reduction in their credit card limits. A majority of these consumers didn't have any late payments, collection accounts or other negative records to trigger the change.

"Fair Isaac's study looked primarily at those consumers whose revolving credit lines were cut even though there were no new delinquencies in their credit reports to warrant a line reduction. In most cases, the line reductions -- an average of $2,200 -- had little impact on consumers' FICO credit scores.

"Indeed, the line reductions hit consumers with credit scores well above the national average, with a median score of 770.

"That may come as a surprise to those consumers because they pay off their balances every month and are careful with their credit, says John Ulzheimer of Credit.com. But at the same time, those customers are also generally less profitable for lenders, he says."

These numbers are likely to have increased in 2009 as credit card companies continued to slash credit limits.  Here are a couple tips if you have had your credit limits cut or are worried that they might be reduced in the future:

• Keep old credit cards open by using them at least once a month. Inactive accounts have a higher risk for being closed by the credit card company. Account closure can dramatically lower your total credit limit and harm your credit scores.
• If you have good credit, you may want to open a new credit card to add a bit of a cushion to your total credit limits.
• Check your credit card expiration dates. Make sure that you get a new card activated when the old one expires.
• Open all mail from your credit card companies and read the fine print.
• Check your credit reports regularly to see how your credit limits are being reported to the bureaus. 
• Aim to keep your monthly credit card use between 1-10% of your total credit limits for the best credit score. You don't want to look like you are "maxing out."

Have your credit card limits been reduced recently? Share your story in the comments section below.

Emily Peters – Credit.com's personal finance expert and former TransUnion credit bureau insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Comments

[Expert Credit]

Hi Emily: 16% is really a very large number - this proves that this is a very serious issue for consumers!
:)