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Credit Line Increase Trends: A Mixed Bag

Since the recession of 2008-2009, there has been quite a bit of discussion about credit lines. Are they going up? Are they going down? Are banks still aggressively managing their risk?

Based on the US data I’ve seen, it looks like a mixed bag. On one hand, the number of credit line increases is clearly going up.

CL AJ post table 1
As the table above illustrates, banks granted significantly more credit line increases in 2012 than they did at the dawn of the recession in 2008. Despite the predictable dip in line increases during 2010, this data suggests that both lender and consumer appetites for line increases were quite robust in 2012.

However, I did a little more digging and found that not all credit line increases are created equal.

CL AJ post table 2
The size of the average increase was roughly 57% lower in 2012 than it had been in 2008. In fact, the average line increase was about 35% lower in 2012 than it was when lenders were supposedly “super cautious” in 2010. In addition, from 2008 to 2012, there was a dramatic decline in the percent of consumers receiving sizeable line increases, which we defined as at or above $7500.

In terms of actual dollars, lenders gave out approximately $10.5 billion in credit line increases in 2008. In 2012, that figure was only $5.3 billion despite hundreds of thousands more consumers receiving line increases.

So…if 300,000 more US consumers received credit line increases in 2012 than in 2008, but the total dollar amount was nearly 50% lower, are bankers tightening or loosening their purse strings?

It’s an interesting question. As the economic recovery rolls along, credit line increases could have a significant impact on how quickly consumer spending rises. This is definitely a topic that I’ll be following closely.

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