Out Debt Out!

You may well not be able to!  No matter how well you handle credit.

The stories are coming out all over the Internet:  A debtor has a bunch of credit lines they have handled well.

Their reward?  Credit line decreases (CLD).  Or an “offer” of cash as an “incentive” to close and pay off the account (AMEX is doing this).  Or…the creditor simply says “Bye!” one day.

The reason?  Cold feet…or too much red ink.  Creditors these days have a lot of one or the other.  Or both.  The tight financial markets, subprime mortgage “meltdown”–the economy in general– are making creditors reassess their exposure and risk to their shareholders (where applicable).

The standards used?  Nothing the consumer has much control over in a lot of cases.  These posts from Debtorboards , for instance, reveal a lot about the situation and the seemingly illogical way that OCs are trying to save themselves.

Posts like this one by Flyingifr:

http://www.debtorboards.com/index.php/topic,7867.msg55987.html#msg55987

American Express CLD’d me in November, giving the “times are tough” reason. The new, improved CL I had was about $200 more than my current balance at the time. Over the next 4 months I paid it down another $1000 without adding any new charged. They cut me again this month, again to about $200 more than I owed at the moment. At that time I figured out that Amex no longer wanted my business and I closed the account. Here are the reasons given (and the truth behind the “reason”

1. Your total debt is too high with American Express or other creditors.

My total debt is $50,000 lower than it was when you gave me the card, and $1000 less with Amex than it was 4 months ago. Now, all of a sudden, it’s too high? …

2. The balance on your American Express card is too high relative to your credit limit.

No kidding, after you reduced it twice in 4 months by almost 50%!!!!

3. The average amount of payments in relation to your overall balance on your American Express account(s) has been too low.

I have always paid more than the minimum payment you requested. …

4. Too many creditors have recently reviewed your credit.

No kidding… including you every month. …

5. Your credit score as provided by TransUnion. According to TransUnion, your score is based on the following factors in your credit report:

5A. Proportion of balances to credit limits on bank/national or other revolving accounts is too high.

According to my TU credit report, my utilization is 19%

5B. Length of time revolving accounts have been established.

My oldest, Wells Fargo, is 6 years old, and has a $50,000 line.

5C. Length of time accounts have been established.

I don’t know if this applies to the Wells Fargo account being my oldest at 6 years or their account at 1 year.

5D. Time since most recent account opening is too short.

Yeah – 1 year – it was YOUR account. …

My other Amex account was closed for this reason:

6. Your spending patterns.

Like they would know my spending patterns. I never used that other account – not once. …

Or this one by Kitten:

http://www.debtorboards.com/index.php/topic,7867.msg56011.html#msg56011

[That is the same "no-usage"] spending pattern that just cost me an Advanta card. I did a BT with it in 2006, paid it off in 2007, and never spent anything. The card was due to expire in a few months, so I WAS going to put it in my wallet to show some usage, but got the letter last week telling me it was closed.

“Steve” wrote:

http://www.debtorboards.com/index.php/topic,7413.msg53031.html#msg53031

These GEMB a-holes are really messing up nowadays! One of my sister’s cards for a Jewelry Store keeps saying she didn’t make her payment, when she paid it off completely. Then, they paid her a refund of $500 while reporting 30-days late to her credit file, and now is saying she owes them about $1000! Her CareCredit card (both GEMB) was CLOSED, and she is pissed!!!

For me, they sent me a BS letter lowering my Paypal credit limit to $100! True, I’ve never used the stinking thing, but, regardless, that bank is clearly going through some stuff!

Another from Flyingifr-Citibank this time:

http://www.debtorboards.com/index.php/topic,7413.msg53636.html#msg53636

[T]hey CLD’d me to an available credit of $125 from a line of $15000. Rather than give them the pleasure of continuing to CLD me as the balance came down I closed the account. Absolutely no attempt was made to keep the business.

It seems Doctor Evil thinks it’s a situation of “debtor is lying about their credit status and therefore the creditors are being sensible:

http://www.debtorboards.com/index.php/topic,7850.msg55858.html#msg55858

I gotta say, have various cards, amex included with various balances and have not had one credit limit decrease or one rate increase. In fact, although solicitations have decreased, amex is the most common one I get.

Not trying to say my creidit is better than yours, but why do you think this is?

Actually, the reason so many are getting the “35-story shaft” from creditors such as AMEX may not really be the fault of the consumer, but…

http://www.debtorboards.com/index.php/topic,7850.msg55861.html#msg55861

As Flyingifr replied in that thread:

Doc – My FICOS are in the mid 700′s and my utilization is 20%.

I think it’s more a case of I live in Arizona (#3 in the nation in foreclosures) and you live somewhere else with a much lower rate.

As in real estate, whether one gets a CLD or not may well depend on only one thing: Location, location, location.