Lenders Cut Credit for Reliable Borrowers

Cathy Chu wrote in Friday’s USA Today that lenders are cutting credit lines and pushing down credit limits on their best-paying customers, which ultimately can reduce these frugal customers’ abilities to get mortgages.A new study by Fair Isaac says 11 percent of U.S. consumers had their access to credit trimmed during the six months ending last October, even though they pay their bills on time and have good credit scores. That’s more than double the 5 percent of consumers with poor credit whose access to credit was reduced in the same time frame.

People who pay on time aren’t very profitable for lenders, says John Ulzheimer, president of consumer education for Credit.com, because they don’t carry balances or pay late fees.The affect of these cutbacks is cumulative, credit experts say. When lenders close accounts or cut limits, it can hurt consumers’ credit scores and make it harder for these good payers to get other loans, including mortgages.

So is this a classic case dammed if you do and dammed if you don’t or maybe more of a Catch-22. I suspect it’s the latter. What the lenders apparently want is someone who struggles along paying something every month on mounting debt amounts and who occasionally is late and has to pay a penalty. Sounds very close to the people who’ve finally hit a hard spot and gone into foreclosure or bankruptcy doesn’t it?

So if you’ve solvent and prudent, don’t bother to get a credit card, because they’ll just cancel you later for being a bad customer and paying the bill every month and that cancellation will cost you on your credit score. Let’s see. They couldn’t call you a deadbeat, since you paid the card balance off all the time. They’ll have to invent a new term for you. What would you call this dangerous perpetrator of an overly good payment history? Spoilsport? Showoff? What?

Now I’ll have to consider being late on a few payments so that I stay in the good graces of my credit card companies. Wow, I sure don’t want to tick them off by paying on time. Who knew that was so evil? Do your part to save America’s credit card companies and be late, too! Come on, we can do it. Let’s all pull together on this.