There may be future difficulties for credit card customers whose limits were cut
April 13, 2008
A recent report has suggested that many credit customers who have recently had their credit limits slashed by their card provider could end up experiencing a range of problems in the future, making it difficult for them to get finance as a result of being so close to their credit limits. Many credit card customers have recently found that their credit limit were slashed to just £100 above their existing balance, and the card companies did not even inform them that they were cutting their credit limits.
It has now emerged that there could be more bad news in store for these affected customers, as the way in which their credit limit has been slashed to within £100 of their existing balance means that until they have made a dent in their existing balance they will be very close to their maximum credit limit. This is something that could go against them when they are looking for future finance, as it is something that creditors look at.
One industry expert commented: ‘The credit limit cut does create an interesting conundrum. The credit scoring models don’t take into account limits cut by creditors to minimize their own risks. So a limit cut that leaves the debtor essentially maxed out can only protect the lender and harm the debtor. This seems grossly unfair since the debtor isn’t given ample warning or notice to clear the decks and instead is caught by surprise.’
Another said: ‘These changes will show on your credit report and could have implications. Lenders can assess this information any way they wish. If you are only a couple of pounds below your balance that could ring alarm bells.’
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