Credit Limits and Market Crash

[Anonymous]

How does market crash affect your credit limit?  I was 12 back then when 2008 market crash occured, and really have no idea about the impact.  Besides, I wasn't living in the United States until we moved in 2012.  I'm somewhat new to credit (1.5 years on oldest account disregarding AU account), so how does credit limit affected by market crash?

[CreditInspired]

I’m not sure I really understand your question but I’ll try to answer.

A market crash has no affect on credit limit. Each individual’s credit profile—income, scores, UT, # of cards, inquiries, types of credit, age, any negatives—is the determining factor for credit limits.

[Anonymous]

I think what our OP may be wondering is whether during a massive economic meltdown (such as the 2008/2009 recession) does that lead CC issuers to begin imposing credit limit decreases on some people -- CLDs that would not be implemented in a more upbeat economy?

I think the answer is yes.  A minor market correction such as happened in the last week should not be thought of as a crash, however.

Other credit related epiphenomena can occur during a sharp recession.  CC issuers begin closing credit cards due to inactivity sooner than they would otherise.  They also close more cards on people they view as borderline risky (mediocre FICO scores, high utilization, only making minimum payments, etc.).

[SouthJamaica]

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@Anonymous wrote:

How does market crash affect your credit limit?  I was 12 back then when 2008 market crash occured, and really have no idea about the impact.  Besides, I wasn't living in the United States until we moved in 2012.  I'm somewhat new to credit (1.5 years on oldest account disregarding AU account), so how does credit limit affected by market crash?

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It can lead to tighter credit standards. Also bear in mind that the Fed is tightening the money supply, which can also lead to tighter credit standards.

[CreditInspired]

Thanks @creditdixie for the clarification.

I did not know Lenders did this. I thought this only happened to cardholders whose homes were being foreclosed on or people who were only making minimum CC payments on large outstanding balances.

This is kind of scary. I didn’t realize CLDs could also happen in a rocky, economic climate. Gives one something to really think about.

[Anonymous]

Thanks for the input guys!  Really appreciated.  I was just curious about credit limits if a market crash would ever occur.  Like I've said before, I really have no idea on the impact and I'm kind of paranoid about part of my assets currently invested in the market, even though its a correction.

[Anonymous]

Good replies and I will confirm Chase lowered my Business Card by $7,500 and my Personal Card CL by $3,500. Got mad ... cooled down and after a couple weeks calmly called in and had a good ole "FDR Fireside Chat". My CLs were reinstated! No other creditor adjusted any cards.

[Anonymous]

https://www.wsj.com/articles/credit-card-spending-limits-in-the-crosshairs-as-issuers-grow-cautious-...

Article this morning on this very topic...

[fuzzle]

https://www.wsj.com/articles/credit-card-spending-limits-in-the-crosshairs-as-issuers-grow-cautious-...

Looks like you may be onto something. Discover is also closing inactive accounts, which is one thing that we can avoid

[Anonymous]

Creditors absolutely CLD and in some cases increase interest rates in such cases.

In 2008, I had high utilization and too many accounts but I had zero late payments. Creditors started CLD'ing me and when my already 80%ish utilization jumped to nearly 100%, Chase increased my APR to 29.99% because my credit went from shaky to beyond dismal all because of AA.