Does a CLD lower FICO score?

[SouthJamaica]

1. Apart from a possible effect on revolving utilization, does a credit line decrease operate negatively towards one's credit score?

2. If so, does it make a difference in FICO scoring whether it is initiated by borrower or by lender?

[Thomas_Thumb]

Neither CLIs nor CLDs impact Fico score directly because the events themself are not factors in the algorithms.

The event may trigger a rescore. However, the result of the rescore would be based on a change in individual and/or aggregate utilization %.

[SouthJamaica]

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@Thomas_Thumb wrote:

Neither CLIs nor CLDs impact Fico score directly because the events themself are not factors in the algorithms.

The event may trigger a rescore. However, the result of the rescore would be based on a change in individual and/or aggregate utilization %.

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Thanks T_T.

[Anonymous]

Hey SJ.  Are you still of the opinion that big credit limits give you a bigger score?  (Other things being equal)

If that's true, then a CLD could lower your score.  And a CLI could raise it.

But if what TT said is true (that CLDs and CLIs cannot alter your score, except by altering utilization) then there's no way size of a credit limit could be related to one's score (again, except as it affects utilization).

Just curious whether you have been having second thoughts.

[Anonymous]

I'd like to know the answer to that as well CGID.

[SouthJamaica]

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@Anonymous wrote:

Hey SJ.  Are you still of the opinion that big credit limits give you a bigger score?  (Other things being equal)

If that's true, then a CLD could lower your score.  And a CLI could raise it.

But if what TT said is true (that CLDs and CLIs cannot alter your score, except by altering utilization) then there's no way size of a credit limit could be related to one's score (again, except as it affects utilization).

Just curious whether you have been having second thoughts.

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No I'm not.

I'm just wondering if the event of a CLD has any impact one way or the other.

Let's say, e.g., one had a CLI or new card coming on line to report, and (a) one chose to lower the CL on another account to offset the increase, or (b) one of one's lenders decided this was too much new credit and took adverse action by a CLD...... I was wondering whether either of those events, in and of themselves, would have any negative effects on one's score.

[Anonymous]

Ahhh... I see.  Then, even operating within your framework, the answer is still No, but for a deeper and more general reason, which is that a credit score is generated purely off of stuff in the credit report, and I don't think the fact of a CLD or CLI is captured within the report.

The report contains your current CL, but the historical data leading up to it (a blow by blow record of what your credit limit was each month and who initiated the change in the CL and why) are not.  At least I think that is true.  Even the trended data on credit cards (where the CRA does capture your monthly balance and any payments you made on it -- and does so for every month stretching back 24 months or so) do not include your CL for each month.  I could be mistaken here and would be delighted to learn differently (truly) but I think this is the case.

If I am right, then the reason why the answer is "no" is not because FICO has chosen not to make it part of its algorithm, but because FICO couldn't do that even if they wanted to.  The historical data about CLIs and CLDs is simply not in the credit report. 

Of course, operating outside your framework, there's another reason why someone would argue that the answer is No.  And that is because credit limits (it would be argued) are not included by FICO in their algorithms except as they affect CC utilization.  FICO could choose to do that, since your current CL is in the report, but in fact they don't.  And since CL-size is not a factor in your score, then changes to your CL are not a factor either.  That may have been TT's argument.

[Anonymous]

Past CL are reported on your reports. On all 3 I have my past CL listed and when they changed.

[Anonymous]

Fascinating!  I have never seen that, and I know of cards where my CL has definitely gone up.  Where on the report does it list all your past CLs?  Does it list the CL for each month stretching back 24 months (say) like it does for balances and payments?

It's been a while since I have pulled my full credit report via annualCreditReport.com -- do you need to pull a true ACR report to see this?  I typically just rely on Karma and its reports when I need one, though I realize they are a bit abridged.

Thanks very much for the heads up.  Delighted to learn something new.

[Thomas_Thumb]

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@Anonymous wrote:

Past CL are reported on your reports. On all 3 I have my past CL listed and when they changed.

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Yes, that is true - CRA reports do include a history of changes in both credit limits and high balances. [Fico summary reports don't include that detail]

In review of my TU credit report I see that each account includes the following:

High Balance: High balance of $X from --/---- to --/----; $y from--/---- to --/----; $Z from --/---- to --/----

Credit limit: Credit limit of $X from --/---- to --/----; $y from--/---- to --/----; $Z from --/---- to --/----

However, changes in revolving account status (open/closed), changes in high balances and changes in credit limits are not scoreable as events. Also, as has been mentioned on other threads, the reason why a credit card account was closed or why the account had a CLI/CLD is not scored in Fico 08. In reality many people experience a CLD or an account closure by a creditor due to inactivity. Both have happened to me. That event is not an indication of a change in risk nor does the event impact score.

That's not to say creditors won't allow those statements/events to influence their decision process if the file undergoes a manual review.