NOT SO “FAIR ISAAC”: Realtors group lobbies against credit-score hits once equity-line limits are cut

Abstract: In a major policy move, the NATIONAL ASSOCIATION OF REALTORS® is calling upon Fair Isaac to “amend its formulas to avoid harming consumers whose utilization rates increase because their available lines of credit [are] reduced” despite on-time payment histories.  The group wants FICO to ignore the utilization rate for such consumers or compute the score as if the credit max had not been reduced.  Read below to make sense of the story:

Say you’ve had a solid payment record on just about all your accounts – three credit cards, your first mortgage, a home equity line and other important monthly bills. The last time you checked, your credit scores were comfortably in the 750s.

Suddenly you get a notice from the bank that because of “market conditions,” your equity line limit has been cut from $60,000 to $35,000, slightly above the $30,000 balance you’ve got outstanding. Then one of your credit card issuers hits you with more bad news: Your $20,000 limit has been reduced to $10,000. Your balance on the card, meanwhile, is about $9,000.

Guess what happens to your credit scores in the wake of the bank cuts? You might assume that nothing happens. You haven’t been late. You haven’t missed a monthly payment. You’re a good customer.

Wrong.     Read on:

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