Credit Crisis Extends to Plastic

In a sign of the true state of the financial industry, The Wall Street Journal last week reported on the higher standards many credit card issuers, particularly American Express, are subjecting their cardholders to. No longer is a high FICO (credit) score sufficient. Credit card companies now want to know where you live and what you do for a living, in response to the housing crisis that is affecting certain areas harder than others. Housing markets in Nevada, California, and Florida are struggling, while North Carolina is growing. Because of this, identical applicants in Nevada and North Carolina are likely to receive quite different terms.

Michael Shortt is a small-business owner in Georgia who recently experienced this firsthand. American Express reduced the limits on his business card drastically, all because Mr. Shortt did not feel comfortable discussing the details of his business with small-business credit and data agency Dun & Bradstreet Corporation. As a result, the limit on one card was cut from $6,000 to $1,000. On another, Amex dropped the limit from $42,000 to $36,000, and then down to $4,300. Mr. Shortt was dumbfounded at the company’s actions, considering he regularly pays his bills in full and has accumulated nearly 800,000 rewards points. Amex’ only comment on the matter was this: “We are being more targeted in managing risk prudently within appropriate customer segments,” according to The Wall Street Journal.

While this particular article focuses on business credit, the consumer side is no different. Financing for everything from mortgage refinances to student loans is more difficult to find and when found, the standards are much higher and less flexible.

Source:Card Issuers Get Personal To Check Credit,” The Wall Street Journal, June 19, 2008