Recession impacts - Credit limits lowered and harder to get a new credit card?

[Citylights18]

The biggest thing is we entered this whole shutdown with no exit strategy. They should have figured out guidelines for getting out before they put everyone in this situation.

[Anonymous]

No, not 800s, I am in the 700s and working towards the highest score possible.  I have 1 secured credit card.  I do not want hits on my credit.  I will eventually get an unsecured credit card when the time is right.  

I wanted to know for those in the 800s how long did it take them to get there?

[sarge12]

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@iced wrote:

This recession is going to be unique in the sense it is both voluntary and specific in its vector of harm. The crash in 2007 wiped trillions in falsely inflated equity out of real estate, some of it in areas that have not seen sale prices at the pre-recession levels since. Most recessions create a financial collapse in most corporate sectors. Neither of those are happening in this recession.

Instead, we took a scalpel to certain industries (hospitality, travel, etc) while leaving others largely unaffected. We voluntarily cut those jobs and services in the name slowing the spread of a virus. We can turn that spigot back on any time, and some places already have. Other recessions don't give us an on/off button like that. Because we do have that button, governments can turn things back on before the point of no return -- the pain we're feeling now has been assessed and deemed an acceptable cost to mitigate the risk of contagion. As soon as those scales tip, we'll open back up.

That's why I don't see this one being one of the worst recessions ever, or lasting that long. As much as people want to think that saving lives is worth it at any cost, we're not and it's not.

As for credit, what was true before will be true during this pandemic as well: people who were already on the edge of solvency will be the ones who get their limits slashed and cards closed. They were moderate risk before and this just makes them high risk. Credit has always been the easiest to get when one doesn't need it, and those people will continue to find credit easy to obtain.

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While I may largely agree with most of what you say, you are overlooking a lot of the problems with a premise we can just turn it all back on like a spigot...we can't. When these restaurants were shut down all the food in their coolers spoiled. Trucks loaded with their supplies also had food that was not labled for sale in grocery stores. Oil pumps that cost a fortune to shut down and restart were pumping oil that refineries no longer needed resulting in negative prices on crude oil. Point is, the supply chain in this Country is amazing, but is not set up to be shut down and restarted like a spigot.  So, in fact shutting down such a large portion of the World's business was the easy part. Re-filling the resaurant coolers and freezers all at the same time will result in shortages everywhere for a long time to come. Not to mention the owner facing the possibility of refilling their stock just to face another shutdown should the restart result in more outbreaks. The logistical nightmare that will be the restart of this economy has not even started good yet, but it is not something as simple as many think. Oh, and by the way, some of the farmers that supplied the restaurants had to plow under the crops they no longer had a market for.

[iced]

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@sarge12 wrote:

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While I may largely agree with most of what you say, you are overlooking a lot of the problems with a premise we can just turn it all back on like a spigot...we can't. When these restaurants were shut down all the food in their coolers spoiled. Trucks loaded with their supplies also had food that was not labled for sale in grocery stores. Oil pumps that cost a fortune to shut down and restart were pumping oil that refineries no longer needed resulting in negative prices on crude oil. Point is, the supply chain in this Country is amazing, but is not set up to be shut down and restarted like a spigot.  So, in fact shutting down such a large portion of the World's business was the easy part. Re-filling the resaurant coolers and freezers all at the same time will result in shortages everywhere for a long time to come. Not to mention the owner facing the possibility of refilling their stock just to face another shutdown should the restart result in more outbreaks. The logistical nightmare that will be the restart of this economy has not even started good yet, but it is not something as simple as many think. Oh, and by the way, some of the farmers that supplied the restaurants had to plow under the crops they no longer had a market for.

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No one said it would be easy or without its micro-level disruptions, but the fact is we still control when things turn back on. Past recessions didn't have such a lever. The supply chain disruptions will be a flash in the pan; just like we saw with the Great TP Shortage of 2020, it took less than a month to go from none to stocked in most stores. And yes, some small businesses will die, while others will spring into existence to replace them. Such is life.

As for oil...lol. It (and coal) has been badly deserving of a slow descent into obsolescence for about 50 years now. I sincerely hope that one of the effects out of this recession is that the whole 'where oil goes, the stock market follows' line of utter BS dies, and in fact we're starting to see that finally. The energy sector is now the least valuable and relevant one in the S&P. I'll be playing a very small fiddle if the oil and coal industries lose billions of dollars to this.

[Anonymous]

Except now a few outlets are warning of possible food shortage due to this. TP shortage is one thing because in a pinch you can find "other things" to use, but what besides food can you eat? That may be a factor that causes more panic and even rioting possibly even lead to people fighting in the stores over who get what. 

I was untouched in 07 as I was in very early rebuild stages and only had 2 CC's, my job was also unaffected so I was able to continue working.

So far the it's the same with this, only that I have considerable unsecured CL's compared to 07. My file says I'm new to credit though i haven't missed a payment on any CC's for the last 10+ years after my rebuild, and I have no other derogs. So I hope that I skate through untouched, but even if i don't it's not like you can object to AA. lol  

Besides if it does happen there are plenty of other Lenders out there to just app a new card later.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

.... I want to know what everyone thinks ...

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I think there's already an abundance of "the credit sky is falling" threads. 

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And fewer "The Credit Sky is Falling" threads won't protect anyone when it does fall. Notice I said "When", not "if". Credit rule of thumb # 1 - credit is a privilege not a right, and what you have today can be taken away from you tomorrow for any reason or no reason. That is what happened to me in 2008. Plenty of lines, never a missed payment, Util was a bit high at about 25-30% but my business was coming into its busy season in a couple of months and by the summer I could pay them all down to 5% Util or less. That was not to be. One of them (I don't remember which one) decided to start Balance Chasing me. That threw my Util from 25% to 85%, which triggered all the rest to also Balance Chase me, which threw my Util close to 95%. That triggered the "Universal Default" provisions and my interest rate (and payments) tripled. This whole scenario took less than 45 days. Keep in mind, I had not missed a single payment on any of them - ever.  With 85% of my payments now going to interest instead of principal, my payoff date, instead of being 6 months out was not closer to 6 years. My credit score had tanked and I was completely cut off from credit.

What has changed between 2008 and 2020? I say NOTHING. The banks will still screw you any time they can and any way they can. The only difference is I am now out of debt and if they do to me now what they did in 2008 I have no problem telling them all to KMA.

[iced]

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@Anonymous wrote:

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And fewer "The Credit Sky is Falling" threads won't protect anyone when it does fall. Notice I said "When", not "if". Credit rule of thumb # 1 - credit is a privilege not a right, and what you have today can be taken away from you tomorrow for any reason or no reason. That is what happened to me in 2008. Plenty of lines, never a missed payment, Util was a bit high at about 25-30% but my business was coming into its busy season in a couple of months and by the summer I could pay them all down to 5% Util or less. That was not to be. One of them (I don't remember which one) decided to start Balance Chasing me. That threw my Util from 25% to 85%, which triggered all the rest to also Balance Chase me, which threw my Util close to 95%. That triggered the "Universal Default" provisions and my interest rate (and payments) tripled. This whole scenario took less than 45 days. Keep in mind, I had not missed a single payment on any of them - ever.  With 85% of my payments now going to interest instead of principal, my payoff date, instead of being 6 months out was not closer to 6 years. My credit score had tanked and I was completely cut off from credit.

What has changed between 2008 and 2020? I say NOTHING. The banks will still screw you any time they can and any way they can. The only difference is I am now out of debt and if they do to me now what they did in 2008 I have no problem telling them all to KMA.

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Yes, credit is a privilege and not a right.

The problem with cautionary tales such as this one is they invariably skip over the most important detail - being in debt in the first place. It sounds like everyone's just one thing completely out of their control away from financial ruin through no fault of their own, as if the banks put a gun to people's heads and told them to run up their credit cards. The trap people fall into is believing that simply making all payments on time is sufficient to be low risk, but this thinking completely ignores the debt someone is carrying. It's when the banks think for a hot second someone may no longer be able to repay their debts (be it in 10 months or 10 years) that the rails come off.

If banks are screwing people, it's only because people invited them up to their place to Netflix and chill in the first place.

[sarge12]

This might be a good place to post my credit card rules

1) Never use a credit card to buy anything you do not have the funds elsewhere to do so. Basically have checking or savings to pay all charges.

2) Never us a credit card to make a purchase you would not make if you did not have credit cards. In other words, do not let cards influence spending...Only buy what you would buy even if you had no cards.

3) Always have emergency savings, and never use them for discretionary credit card spending. The emergency savings is for emergencies, and only emergency expenditures on a card should be paid by emergency savings. Depleted emergency savings should be priority 1 until replenished. That savings should be treated as debt until replinished. I recommend at least 3 months salary in this fund.

4) Always pay every credit card in full every month. Exceptions to this are allowed for 0% interest, but still should meet rule 1 and 2.

5) Do not let credit cards have you spending future pay, not yet earned. Future pay is not guaranteed.

6) Cards are for convenience, rewards, extending warranties, purchase protection etc. Every charge is creating new debt. Some of my rules are redundant, which emphasizes the importance. For major purchases credit cards are lousy, very expensive debt. Installment loans are better suited for that, and IMO should only be for a house or car or maybe central air or roofing. Look around your kitchen at the appliances...if you live long enough they will all be needing replacement. When they do fail, and they will, that is not really something that should be called unexpected expenses. It is rather an absolute certainty these appliances will fail, it may be unplanned expenses, but should not be.

7) These rules are very hard for most, and might take years to get your finances to meet them all, but all should be aiming for that goal. Many say that the perhaps 10k for emergencies is not realistic, but yet they will spent 10k more to finance their dream car vs reliable transportation. It is not about ability, it is more about setting priorities. Nearly nobody can continuously spend more than they make, eventually the debt dries up and you still have the bills.

[Dmessina666]

In most cases, I'm sure you're right. I'm about to close on a house, in the loan process now. All cards and accounts are AZEO, and Comenity decided to give me a CLD $1000 to $100. Now that may seem small in the scheme of things, but it screwed me. Big time. Luckily I had a zero balance, but the bank found out and now things are being held up all over a jewelry card I never paid late, never carried a balance, and never gave a reason to concern them. 

[Anonymous]

This is the second time I've seen you post this, and I'm curious...if you're AZEO, how does losing $900 of credit on a meaningless store card screw up your

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@Dmessina666 wrote:

In most cases, I'm sure you're right. I'm about to close on a house, in the loan process now. All cards and accounts are AZEO, and Comenity decided to give me a CLD $1000 to $100. Now that may seem small in the scheme of things, but it screwed me. Big time. Luckily I had a zero balance, but the bank found out and now things are being held up all over a jewelry card I never paid late, never carried a balance, and never gave a reason to concern them. 

This is the second time you've posted this, and I'm curious...if you're AZEO and the card is paid in full, how does losing $900 of credit on a meaningless store card cause your bank concern?

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