Regardless of their success in making on-time payments in the past, many consumers across the country are finding out that if they miss just one payment on their credit card debt, even if it’s only by a day or two, their borrowing limit can be reduced significantly.
Many major credit card lenders are now making a habit of reducing borrowers’ credit limits as a result of one missed payment, according to a report from the New York Daily News. In one instance, a 57-year-old consumer who had never ignored a payment in his life saw his borrowing limit cut to just $2,700 from $18,000 as a result of one missed deadline. However, the banking industry says this practice is intended to combat a risk seen across the borrowing landscape.
“The bulk of these changes have been a direct result of an action or inaction by the consumer, as well as a generalized risk that was spread out across the economy,” Scott Talbott of the Financial Services Roundtable, an industry group based in Washington, D.C., told the newspaper.
This type of action can be problematic for consumers because it will affect their credit utilization ratio, a factor which figures heavily into their credit score.