Credit Score Report Shows Mixed Results

Tuesday, 31 March 2009, 14:46 | Category : Uncategorized
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Record low interest rates on home loans are finally getting the attention of new home buyers who may have been on the sidelines in recent years waiting for signs of the housing recovery.  Earlier this week, FICO released a new report showing the affects of credit line reductions.  The credit score study measured the credit card limit cuts as well as the subsequent impact to consumer’s FICO credit scores. The study is the first of its kind since credit card issuers began to heavily ramp up their credit limit reduction activity in early 2008.

In a interview by telephone, home financing tipster, Jason Cardiff said, ”I understand why the banks are cutting credit lines, but for many homeowners trying to qualify for a refinance, the 20-40 points they lost often pushes them out of the range for refinancing contention.”  Cardiff continued, “To make matters worse, many credit lines have set up alerts in their system when their credit card customers’ fico score declines or when their other credit lines percentage of available credit diminishes and they react by cutting the credit limit again.”  Clearly the train reaction can be devastating to homeowners looking for a mortgage solution.  

Cardiff considered some note-worthy points of the credit report study by FICO: 16% of the U.S population had their overall available revolving credit reduced between April and October of 2008. With credit bureau databases holding 200+ million consumer credit files, this would seem to indicate that at least 32 million cardholders lost some of their credit limits during the study timeframe of April 2008 through October 2008.

The Fair Isaac report found that 10 million consumers acknowledged that their credit limits were reduced by a credit card company or home equity lender.  The financial companies that hold the debt on these credit cards claim that the maximum revolving debt for these accounts changes “because of some sort of risky credit activity including late payments, accounts in collections, or a negative public record added on their credit reports.”  However thousands of consumers with good credit scores reported to have their credit lines cut or significantly reduced without any changes in the credit profile.  Many of these consumers also claim that the reduction in credit limits caused their credit scores to drop on average of 40 points. 


Read more of the article > Does Credit Report Study by FICO Consider the High Cost Regions?

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