| August 21, 2009

FICO: Dropping limits show small effect on credit scores

Some consumers may be worried that their credit score could end up being affected by reductions in credit card debt limits.

However, a recent study done by FICO shows that the reduction of credit limits has had a minimal impact on the credit scores for a majority of consumers surveyed. From October of 2008 to April of 2009, 33 million cardholders saw reductions in their credit card debt limits. Of those, 9 million had recently had a negative indicator in their credit score.

The survey found that the median credit score for those 24 million cardholders was 760, and that the average reduction in credit limits was $5,100. FICO found that the credit reports for those consumers showed low credit card balances, few missed payments and a lengthy credit history.

“Reductions in card limits were found to have negligible impact on the FICO scores of most consumers in this group,” the report stated. “Once their available revolving credit had been reduced, FICO observed a drop in score for only a third of the people in this group, an estimated 8.5 million consumers, with the typical score drop well under 20 points.”

Credit card companies have been reducing credit limits in an effort to reduce their risk. According to a recent report from USA Today, which relied on data from Equifax, credit card balances dropped by 3.3 percent during the second quarter when compared to the same time last year.

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