Study Finds Little Impact to Most Consumers’ FICO Credit Scores When Lenders Lower Spending Limits on Credit Cards

Blog Post
Radial circle

MINNEAPOLIS – August 20, 2009 – FICO (NYSE:FICO), the leading provider of analytics and decision management technology, today announced the results of its study on the impact to consumer FICO® credit scores from lender reductions to credit card limits. The study found that while U.S. lenders have made substantially deeper cuts into consumer credit card lines, their targeted approach has had minimal impact on the FICO credit scores of most card customers. The study also found that credit scores fare best when consumers keep balances low on their credit card accounts.

“Our study suggests that lenders are using a scalpel and not a hatchet to trim their revolving credit exposure and meet their requirements for regulatory capital,” said Dr. Mark Greene, CEO of FICO. “This bodes well for the economy if we are counting on empowered consumers to stimulate growth and help end this recession. Based on our findings, the fundamental rules of Wall Street and Main Street still prevail. Both lenders and consumers perform at their best when they maintain smart, responsible credit strategies.”

FICO found that available revolving credit had been reduced for an estimated 33 million U.S. card holders between October 2008 and April 2009, up from an estimated 25 million card holders between April 2008 and October 2008. Of those 33 million card holders, the researchers found that credit reports for nearly nine million contained recent negative credit references such as reported late payments. Such “risk triggers” may have prompted lenders to reduce those customers’ card limits.

For the bulk of its study, FICO focused on the estimated 24 million consumers whose credit card limits were reduced despite the absence of any new risk triggers in their credit reports during the study period. The researchers found that:

  • Card holders in this group had a median FICO credit score of 760, on the scoring model’s 300-850® score range.
  • The average reduction in credit limit was found to be $5,100, more than double the reduction that FICO observed for comparable consumers six months earlier. However, $5,100 was only 14 percent of this population’s average total revolving credit.
  • Credit reports for these consumers generally contained very low account balances, low limit-to-balance or “credit utilization” ratios, very few if any reports of missed payments, and a long credit history.
  • Reductions in card limits were found to have negligible impact on the FICO scores of most consumers in this group. Once their available revolving credit had been reduced, FICO observed a drop in score for only a third of the people in this group, an estimated 8.5 million consumers, with the typical score drop well under 20 points.
  • Of the remaining 15.5 million consumers, the company found that an estimated 3.5 million had no appreciable change in FICO score, and scores for the remaining 12 million consumers actually increased after their credit line had been lowered.

The study also found that credit limits and account balances continue to be significant factors in the prediction of credit risk for the general population. Consumers who use 70 percent or more of their available revolving credit were found to be 20 to 50 times more likely to become delinquent on a credit obligation within the next two years, compared to consumers who use less than 10 percent of their available credit.

“While revolving credit utilization is an important predictor of credit risk, our FICO scoring model is robust and considers many aspects of the consumer’s credit behavior,” said Robert Duque-Ribeiro, general manager and vice president of Scoring for FICO. “The findings from our study suggest that many people whose limits were reduced lowered their balances on other revolving accounts and in general managed their credit conservatively. These practices resulted in their ability to sustain or improve their scores despite reductions in their credit card limits.”

For its study, FICO evaluated depersonalized consumer credit information captured between October 2008 and April 2009. The study report is FICO’s newest Insights white paper and is available at The FICO Insights series provides briefings on best practices, research findings and product innovations.

About FICO
FICO (NYSE:FICO) transforms business by making every decision count. FICO’s Decision Management solutions combine trusted advice, world-class analytics and innovative applications to give organizations the power to automate, improve and connect decisions across their business. Clients in 80 countries work with FICO to increase customer loyalty and profitability, cut fraud losses, manage credit risk, meet regulatory and competitive demands, and rapidly build market share. FICO also helps millions of individuals manage their credit health through the website.

Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company's Decision Management strategy and reengineering plan, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to realize the anticipated benefits of any acquisitions, continuing material adverse developments in global economic conditions, and other risks described from time to time in FICO’s SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2008, and its quarterly report on Form 10-Q for the period ended June 30, 2009. If any of these risks or uncertainties materializes, FICO’s results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.

FICO and 300-850 are trademarks or registered trademarks of FICO, in the United States and/or in other countries. Other product and company names herein may be trademarks or registered trademarks of their respective owners.

Media contacts


Katie O’Connell
+1 510-621-9832

Europe, Middle East & Africa

Darcy Sullivan
+44 (0) 7808-777-339

Asia Pacific

Saxon Shirley
+65 6422-7795

América Latina

Milla Delfino
+55 11 97673-6583

Take the next step

Connect with FICO for answers to all your product and solution questions. Interested in becoming a business partner? Contact us to learn more. We look forward to hearing from you.