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Downturn / market correction / recession

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800FICOGoal
Established Contributor

Re: Downturn / market correction / recession


@tacpoly wrote:

So the trick is to remove any reason for ccc to see you as a(n increased) risk, specially when their tolerance for risk is greatly diminished. 


I would imagine having high CL's not in relation to your income would be seen as a risk by lenders.

 

 

 



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Message 11 of 16
tacpoly
Established Contributor

Re: Downturn / market correction / recession


@800FICOGoal wrote:


I would imagine having high CL's not in relation to your income would be seen as a risk by lenders.

 


Most ccc don't have independent knowledge of your income -- just what you tell them -- so most primarily look at your use and payment pattern instead of credit in proportion to income (I think income matters more for applications).  If during the recession you started carrying ever increasing balances or started paying smaller portions of your balances per month or applying for more credit cards, then those are signs you might be having trouble keeping up with your debt.  If, however, you continued to pay your balances in full and was not credit seeking, then I doubt you even appeared on their radar.  

 

After I moved my income effectively went to 0 (I went back to school), but my credit card companies probably had no idea, nor did they care, since I didn't do anything to worry them credit-wise.

Message 12 of 16
SouthJamaica
Mega Contributor

Re: Downturn / market correction / recession


@Anonymous wrote:
Something I read in another thread reminded me of my experience in 2008/2009 and I started wondering how common it was and if there were a way to prepare for it. I mean... Other than having cash reserves.

In 2007 I thought I was smart... I had about 10k worth of 2k cards (citi, Barclay, several wamu, a couple bofa) and a utilization of about 50% and a credit score of 640...i knew I was supposed to be below 30%... But like I said, I thought I knew what I was doing... Paying all that stupid interest per month.

When people started going on TV saying the sky is about to fall... I put in CLI requests with all my cards... I mean, I'm already carrying a balance. What if the sky falls, I might need the cushion..it seemed smart at the time. Most if not all of these were denied.

Very shortly after, related to the CLIs or otherwise, one of my cards decided to balance chase. Immediately after the rest of my cards saw my new extra high balance, the rest balance chased as well... It was a race to the bottom, and I lost.

If I needed the credit for cushion... Well... It was never available to me when it could have been useful. Luckily, I never lost my job, though my income did contract for a bit.

Just to be clear... I never missed a payment. Even the cards that chased me all the way to 0...i paid them all off in full. I still have my home depot card that never closed me out. None of them had missed payments. The adverse actions were due to the general economy and possibly exasperated by my profile, utilization and subsequent snowballing from AA.. But not missed payments.

FF to today... I have close to 100k in available credit with about 10% utilization which should be paid off soon. Had 0% before some unexpected expenses during the summer. If we had another recession... I have a much better cushion... not necessarily to spend high utilization, but, more than I had last time.

I know none of us can tell the future... I hope we don't see anything like 2008 again in my lifetime, however... The standard boom and bust cycle we've been on for decades has people who are smarter than me saying we are close to the peak of our bull market. I'm inclined to believe that much as a general statement.

So... First question... For those "smart" people like me back then, who carried too high a balance but DIDN'T do CLIs when bad news was on tv... Was the balance chasing across the board pretty common?

Second question... People who were closer to my current position with low utilization ... Did you fare better... Or did they balance chase everybody?

Basically, what's the best and worst case scenario? I'm assuming they didn't balance chase and cancel every cc holder in the country... But maybe they did. How many people made it through with no AA at all, or very minor... What did it take?

It's not comfortable for me to say this but the reality is that the more you owe, the more exposed you are when the economy goes in the tank. As you yourself have experienced, the banks who were once begging you to borrow from them are not your friends, and will turn on you on a dime. Having high credit limits will probably be no comfort at all, because, as you have also experienced, the bank can take them away whenever they feel like it. So yeah, I would want to have the highest possible credit limits, so that if the bank did a CLD it might not wipe out all your credit. But I don't think it counts as security in any way to have them.


Total revolving limits 650200 (530700 reporting) FICO 8: EQ 706 TU 714 EX 715

Message 13 of 16
Anonymous
Not applicable

Re: Downturn / market correction / recession

Here's a link that gives a longer discussion of the pros and cons of updating your income with your CC issuer:

 

https://www.nerdwallet.com/blog/credit-cards/income-updates-to-your-credit-card-issuer/

Message 14 of 16
Andypanda
Established Contributor

Re: Downturn / market correction / recession


@tacpoly wrote:

@800FICOGoal wrote:


I would imagine having high CL's not in relation to your income would be seen as a risk by lenders.

 


Most ccc don't have independent knowledge of your income -- just what you tell them -- so most primarily look at your use and payment pattern instead of credit in proportion to income (I think income matters more for applications).  If during the recession you started carrying ever increasing balances or started paying smaller portions of your balances per month or applying for more credit cards, then those are signs you might be having trouble keeping up with your debt.  If, however, you continued to pay your balances in full and was not credit seeking, then I doubt you even appeared on their radar.  

 

After I moved my income effectively went to 0 (I went back to school), but my credit card companies probably had no idea, nor did they care, since I didn't do anything to worry them credit-wise.


Not being honest with CC's regarding income could be considered credit fraud.

Message 15 of 16
tacpoly
Established Contributor

Re: Downturn / market correction / recession


@Andypanda wrote:

@tacpoly wrote:


Most ccc don't have independent knowledge of your income -- just what you tell them -- so most primarily look at your use and payment pattern instead of credit in proportion to income (I think income matters more for applications).  If during the recession you started carrying ever increasing balances or started paying smaller portions of your balances per month or applying for more credit cards, then those are signs you might be having trouble keeping up with your debt.  If, however, you continued to pay your balances in full and was not credit seeking, then I doubt you even appeared on their radar.  

 

After I moved my income effectively went to 0 (I went back to school), but my credit card companies probably had no idea, nor did they care, since I didn't do anything to worry them credit-wise.


Not being honest with CC's regarding income could be considered credit fraud.


Only when applying for credit (new cc or cli).  We are not required to regularly update income.  So if you are implying I committed credit fraud by not updating my income, you are wrong.  

Message 16 of 16
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