08.22.09
By Nicholas Storie
It has gotten harder for Americans to access credit during the current economic downturn as credit card companies cut credit limits, but a new report finds that these cuts have not had a dramatic impact on consumers’ credit scores.
The study from FICO found that 24 million consumers had their credit card limits reduced despite the fact that they did not do anything that would normally cause a reduction in their limit. Of this group, the average credit limit reduction was $5,100 – more than double the amount FICO saw in a survey six months prior.
However, the report also found that this reduction did not create a major change in the credit score for most.
“Reductions in card limits were found to have negligible impact on the FICO scores of most consumers in this group,” said the study. “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.”
A new set of credit card rules went into effect this week which will give card holders the ability to cancel their cards and pay off the balance over five years if they do not agree with changes made to the card. However, some analysts say a cancelation of their card could negatively affect a consumer’s credit score.