LIL' BUDDY'S BLOG - As Lenders Slash Credit Card Limits, Many See Their Credit Scores Take A Hit!
THE CHICAGO IL REAL ESTATE MARKET, AND OTHER THINGS CHICAGO, FROM THE POINT OF VIEW OF A LITTLE WHITE DOG!
Hey, you dogs! This photo is a couple of years old, when I was a bit more flushed. These days, in today's tough economy, money's a bit harder to come by, it seems. Glad I stockpiled extra Meaty Bones in '07!
It's kind of ironic, you know.
Banks are clamping down on the amount of credit they offer. Mortgage lending rules - tighter! Loans to build your business - a series of hurdles and gates.
Even credit card issuers are clamping down!
According to the FICO Company, formerly Fair Isaac Corporation - you know, the firm that developed the Credit Scoring Methodology for humans some years ago, Banks cut the credit limits of roughly 58 Million Cardholders within the last 12 months.
Well, on the one side, that can be a good thing!
Many hold credit cards they rarely, if ever, use. Heck, a couple of years ago, when I was a pup, I was issued three credit cards - two Master Cards and a Visa - and I didn't even have a Social Security Card back then (the rules for dogs - you have to be at least 2 Human Years Old to apply for a SSN!).
Not so today! You know, I can't remember the last time one of my doggie friends got an unsolicited credit card offer in the mail. Can you imagine that?
And for humans - well, as the credit lines on their cards get cut, their FICO Credit Scores - the scores that are needed to get everything from a new home to a car loan to a rental apartment - are taking an unwitting hit.
How?
According to Gail Marksjarvis in Thursday's Chicago Tribune, when a credit card limit is slashed, if you carry a month-to-month balance, the percentage of your outstanding debt to your total available credit increases. Under FICO Scoring, the numbers penalize you if your debt-to-credit-availability ratio goes up!
And for those who are very careful about putting purchases on their cards, but have charged a few things and carry them over, many are getting penalized with a lower FICO Credit Score, without really doing anything to deserve the lower score.
In the past, credit card companies reduced a cardholders line of credit only when they began to exhibit irresponsible payment behavior. But today, in a sluggish economy, card issuing companies simply want to limit their exposure.
But the unintended side effect?
These otherwise-responsible credit card holders see their FICO Score, and their purchasing power, seemingly erode, almost overnight.
Considering buying a car? Or a house? Or investing some money into your business?
Sorry, Buddy - it's gonna be a little harder now.
Just the wrong formula to for helping humans needing to tap a little credit, so our overall lackluster economy might grow a bit.
Makes no sense to this dog, but, hey, what do I know? I pay for my purchases in bones!
Have a Great Weekend, you dogs!
YOUR ACE REPORTER ON FOUR PAWS,
BUDDY HOLLY MOSS & DEAN'S TEAM CHICAGO
