Credit Card Limits Cut

For 58 million card holders, the past 12 months which ended in April have had their limits cut down by credit cards firms, despite a high percentage had good credit scores.

The cuts hurt about a third of consumers, but many did not see a large impact on the credit score, according to a study by FICO. The effects may be because lenders have cut limits due to unused or lightly used card.

The data shows that approximately 25 million card holders saw their limit cut between April 2008 and October 2008. Limit cuts jumped 32% in the following 6 months as the economy weakened.

The other 33 million card holders were in the group that saw limit cuts between October 2008 and April 2009. FICO found that the majority had strong credit histories.

In this group, 73%, or 24 million had credit limits cut despite no new negative data in their files. FICO noted that this group had a median credit score of 760 on a scale of 300 – 850. This is above the U.S. median of 723.

9 million card holders in this group had examined their history and found negative information such as late payments. This might have triggered cuts as late payments are considered a sign that an individual is a higher credit risk.

From October to April, the average credit limit reduction was $5,100, more than double the cut for comparable customers 6 months ago.