UK Cardholders Have £50+ Billion in Unspent Credit, FICO Data Reveals

LONDON — January 22, 2013 — FICO (NYSE:FICO), the leading provider of analytics and decision management technology, today released UK cards data showing that 33 percent of credit limits are unused. Despite card issuers reducing credit limits since 2008, more than £50 billion remains “open to buy.”

This data aligns with recent reports from the FICO^® Benchmarking Reporting Service showing that UK cardholders are managing their credit carefully, including avoiding late payments and keeping balances well below their credit limits. The unused credit is slightly lower than 2011, when the figure stood at 34 percent. In 2008, before issuers began reducing open credit limits to reduce risk exposure, the figure stood at 39 percent.

“There are pros and cons to having a large amount of credit card limits available,” said Nigel Brayne, senior director of Global Business Consulting for FICO. “On the positive side, this indicates that many people have a solid ‘cushion’ in the event of financial hardship. On the negative side, card issuers must hold capital in reserve against open credit limits, so the unspent card limits also reduce the amount of capital lenders can make available to consumers for personal loans, auto loans and mortgage loans.”

Some of this available credit may be due to cardholders who have been inactive for a long period of time, perhaps because they have switched to other credit cards to make purchases, Brayne noted. “At the very least, card issuers should review inactive accounts before sending renewal cards, as there is a fraud risk if cards are delivered to out-of-date addresses.”

FICO also observed slight reductions of 4.5 percent in total credit card exposure and 2.6 percent in exposure on cards in active use, compared to 2011. A review of cash exposure — the percentage of a card’s credit limit that can be used for cash withdrawals — showed that two-third of accounts have a cash limit above 95 percent.

“This suggests that most card issuers are not varying cash limits by account risk,” said Brayne. “FICO recommends risk-based cash limits as a best practice, and it can be managed using FICO TRIAD Customer Manager version 8.”

The latest figures are based on a November 2012 snapshot covering a representative sample of credit cards in the UK. The data comes from client reports generated by the FICO^® TRIAD^® Customer Manager solution in use by most UK card issuers.

About FICO
FICO (NYSE:FICO), formerly known as Fair Isaac, delivers superior predictive analytics solutions that drive smarter decisions. The company’s groundbreaking use of mathematics to predict consumer behavior has transformed entire industries and revolutionized the way risk is managed and products are marketed. FICO’s innovative solutions include the industry-leading solutions for measuring credit risk, managing credit accounts, identifying and minimizing the impact of fraud, and customizing consumer offers with pinpoint accuracy. Most of the world’s top banks, as well as leading insurers, retailers, pharmaceutical companies and government agencies, rely on FICO solutions to accelerate growth, control risk, boost profits and meet regulatory and competitive demands.

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