Does this sound fair? FICO Scores Drop after Credit Card Companies Lower Your Credit Card Limits!?

[FightClub]

I didn't call the "Backdoor Numbers" since I just discovered them.  I did already contact the CC's, they all said that they would review it and notify me by mail within 10-14 business days.  Of course, since I am still posting on here, you know what the decisions were.  Every letter that I have received sites the same reasons for their determination, Available Credit to Balances, Too High, Too many accounts with High Balances.  I've been dealing with this for the past 15 months.  It appears to me that each CC is determining my fate by the actions of the other CC's that have already passed judgment against me.  The CSR's on the phone, all state that I "show a high risk pattern" and unfortunately, it is an automated risk module and that there is nothing that they can do about it.  Some CSR's even were personable enough to share their own personal stories and tell me that "they know how [I] feel". (That honest person is probably out of a job now).

I just paid off my AMEX, when I tried to use it & I was told to contact them.  How embarrassing!  They closed my account and told me that a letter was sent in the mail.  I got the letter 2 days later.

On a good note: (So Far) Bank of America VISA, Capital One VISA, Discover, Target VISA & a Texaco Chevron Gas Card are the only CC's who have not messed with me.

My Black List includes: (Which you can see by the lowered CL's were all under 30% or 1/3rd used)

Household Bank / CL $20,000.00, $154 balance CLOSED by CC Citing "High Risk due to 30 day late on past mortgage.

HSBC / CL $10,000.00 down to $300 ???

Orchard Bank / CL $1000 down to $200

WAMU / CL $8,000.00 down to $3370

Wells Fargo MC / CL $8,500 Gave me the option of CLOSING my account at 9.99% OR keep it open @ 29.99%

Advanta / CL $5,000 down to $1900 - I paid them off and closed it!

Banana Republic VISA/ CL $7,000.00 down to $2900.

CitiCard / CL $16,500 down to $10,500

Chase / $12,100.00 down to $3,600

GE Moneybank $11,000.00 down to $2100

HOME DEPOT / CL $16,000.00 CLOSED by CC's when the balance got to $10,000.00 (Just in the middle of finishing our 3rd Beauty Salon).

I own a small business and utilize my cards for certain purchases.  Specific cards are reserved for certain items which makes it easier to manage the cards under 30%.  By the lowering of majority of my CL's, my FICO keeps decreasing which causes my interest rates to keep increasing and the cost for me to finance my businesses and my personal life are impossible.  All of this motion caused by the CC's makes it appear as if I am quickly using up all my available balances, which is just the opposite.  My income, more than satisfies all of the debts that I have incurred at the interests rates that I originally sustained.  Now with the big shifts and the lack of available credit, my monthly CC payments are way out of the budgeted scope.  If it comes to me owning up to my debts vs. feeding my wife and child, my family wins.  I have 37 employees who depend on me keeping my doors open so that they can feed their families.  Most of whom are single parents, struggling in this tough economy.  Something has to happen or these CC's will single-handedly cause this nation to fail, one company, one town at a time.  

[FightClub]

I understand the high util of my cards, but my history is pretty solid when it comes to me util the cards for my business purchases.  All purchases are approximately the same amounts and happen around the 1st and 15th of every month.  Payments are just as organized.  I know you say that this is not personal, but their blanket approach to my situation, seems to make it look as if they totally disregarded my good standing and organization.  This makes me feel like just another number and that none of my efforts were recognized.  Am I supposed to wait till I no longer need credit in order to build a better credit profile?  This is really confusing.  I'm starting to wonder on whether or not I am or I am NOT supposed to use credit.  If you use it, you can't use too much, though they give you a CL that makes it appear that if you did ever need to - you could, but if you do, you'll be spanked heavily for it.  If you don't use it, or didn't use it enough then it'll be taken away from you for not using it, but not without it first taking a munch or two out of your credit score.  If you have a bunch of open lines, but only use a fraction of each, you have too many open lines and too much available credit that you can potentially abuse, so they put you into a high risk category, and start lowering your CL's or closing your accounts or raising your interests rates to entice you to use or not to use your credit cards!  All for what???  A 3 digit rating they call FICO, which the majority of the world uses to judge on whether or not you are a trustworthy person. 

Aaaarrrggh!  I feel like Charlie Brown sometimes.  Lucy represents the Credit Companies and the football is the American Dream. 

[Anonymous]

Business cards don't report to personal. Why are you using personal cards for business expenses? You have high utilization showing and were 30 days late on a morgage payment, what do you expect?

[Anonymous]

Believe me, I understand. The problem is that the banks have tightened up their risk assessment models so much, that even people who have sky high FICO scores and stellar payment histories get caught up in the "risk" net. The banks are looking for ways to reduce their own liabilities and exposure. And, you're absolutely right in that they don't care one iota about how your FICO score affects you as an individual, or your small business. They only care how they can use it to protect their own bottom line. That's what it was designed for, and intended for, after all. Their number one priority is to protect the interests of their shareholders. With the economy in such a deep recession and credit card defaults on the rise, banks are taking actions (overreacting in a lot of cases, and acting too prematurely in others) to protect their bottom line.

What's happening to you is called "universal default". All it takes is one lender to trigger it and you get the snowball effect that you're experiencing now. Save for PIFing, and waiting it out, there's not a whole lot you can do. In spite of the way that the entire U.S. economy, and business infrastructure is structured, individuals don't have a 'right' to credit. What the CCCs giveth, they can taketh away. It's still just a privelege, in spite our need for it (because we frequently need good credit ratings to get & keep jobs, and a roof over our heads, etc... And, to get good credit ratings, we have to have credit).  That's why I've been encouraging people to write to their Senators to tell them about how this credit crisis and the adverse actions of the banks are impacting both their personal lives, but especially their small businesses. The adverse actions are further threatening the economy, because in spite of whether or not businesses (and individuals) should be using cash vs. credit, for the past several decades, that's how the entire house of cards has been structured for everyone, period.

Write a letter to your Senator, and tell them about your stellar payment history, how your business is structured, and how the adverse actions of the banks (that you helped to bail out with your taxes) have negatively impacted your business. Look up the SEC filings for the lenders who have taken adverse action against you, and copy their senior executives on the letter.

Certainly, that doesn't remedy your immediate situation. But, paying off your balances (in full) will put you in the best position to stop the snowballing of the universal default that you're experiencing. Once your balances are paid, your credit scores will recover (assuming there are no other baddies, like missed payments, etc...). When your credit scores recover, do business with those banks that didn't jump on the bandwagon, and talk to a credit union.

And, going forward, you might want to structure your payments such that your reported balances remain very low, or zero. Even if you're PIFing every month, it may appear to your other creditors that you're constantly maxed out because of the balance that's actually reporting. This requires you to know when your lenders report to the credit bureaus each month (usually after the statement close date, not to be confused with the payment due date). Believe it or not, getting in rhythm with the reporting dates is a very good method of staving off adverse action. I use quite a bit of my credit lines (some of them I max out every month). I just make sure that what actually reports is zero, or a very small balance on one card only. Sometimes I miss (like this month, due to BoA doing a midcycle update), but overall, it's kept me under the risk radar.

Good luck. I hope that you're able weather this storm, and come out of it stronger than ever. We're all trying to stay afloat until we reach calmer seas.

[Anonymous]

I think that people who have solid borrowing and payment histories with their lenders expect it to be business as usual, until their lenders change their minds. If you read these forums, you'll note that plenty of people have experienced adverse action, noting old stuff that was on their credit reports years before they even established a lending relationship with their current creditors. Meaning, the lendor was aware of that 30 day late from 2004 when they granted the initial credit line in 2006. They adjusted their risk models, or just don't want to admit to their customers that they need to make deep, across the board cuts to everyone.

The OP didn't indicate (one way or the other) that his missed payment was recent. And, not everyone is hyper aware of how the balance reported might trigger universal default, particularly when they've got a good and steady payment history and plan. Not everyone is a FICO or credit expert. But, everyone deserves the respect, support and common decency that these forums offer. 

---

@Anonymous wrote:
Business cards don't report to personal. Why are you using personal cards for business expenses? You have high utilization showing and were 30 days late on a morgage payment, what do you expect?

---

[Anonymous]

---

@FightClub wrote:

  If it comes to me owning up to my debts vs. feeding my wife and child, my family wins.

 Message Edited by FightClub on 01-19-2009 10:38 PM

---

It sounds like the risk models have made a sound decision.

Get some biz cards, balance transfer the balances off of your personal report at 0%. Problem solved.

Why did you pay off and close the only card that didn't report the balance to your personal credit report (Advanta)

[upinflagstaff]

This sounds like the business needs to have more of the accounts in its name instead of using your personal credit history to build it. I understand that new businesses often don't have that choice, but you indicated that you have 37 employees and just opened your third salon. It might not help you right now, but I do recommend getting different financing - especially for depreciable assets - such as a line of credit for the business.

You might also write to your congress critters asking for a chunk of the bailout money since the credit crunch is likely to put 37 people out of work

[FightClub]

Ever tried to get a business credit card with less than 2 years on the books and being a first timer?  You still have to personally guarantee the credit card and ANY negative reporting WILL affect your personal FICO (ie. CL's lowered to make your balances maxed out).  My business lines of credit were, on the average between $2,000.00 and $10,000.00.  When you are a small business, you will more than likely have to utilize personal credit cards as part of a start up.  Our start up costs and lease equipment exhausted the majority of our hard cash and other services ONLY accepted payments through credit cards, NOT cashier's checks, money orders, wire transfers or cash. Your Articles of Incorporation realize that this is a common practice among small business owners and makes provisions within the documentation to identify which personal member's CC's will be recognized as a business related credit card.  This way, you have a leg to stand on for the IRS.  Starting a business isn't cheap and the timing for us fell right in the midst of this economic mess.  So what was I doing using my personal credit cards for business?  Well... I was starting up a business.

[FightClub]

"It sounds like the risk models have made a sound decision.

Get some biz cards, balance transfer the balances off of your personal report at 0%. Problem solved.

Why did you pay off and close the only card that didn't report the balance to your personal credit report (Advanta)"

They up'd the APR to 24.49% and it was the newest line of credit that we had. Only had it open for about a year.  In the middle of this CCC mess, they probably would have used the open available credit against me citing more of a "risk".

BTW "partsworks",  I hope you don't ever consider working for a crisis hotline. 

Message Edited by FightClub on 01-20-2009 06:09 PM

[fishbjc]

Can your business support a line of credit on it's own?  What do your financial statements look like?  Have your CPA or Accountant sit down with you and go over everything.  Speak to the manager of a local branch and see what's available for a small business.  Take your financials with you.

A business needs to build on it's own and support itself.  You may be able to look at cutting costs or raising revenues.

I agree with a lot of what you wrote.  A lot of people are getting SKREWED by these cld's...one card at a time.

I wonder if any of these cards are planning to *balance chase* you?  Time will tell.  Good Luck OP.