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  • Frank Tian

💳 I Got a Credit Line Decrease (CLD)

This hasn’t happened in years. I actually got multiple line increases in the last 3 years.


Is it a sign of a change in overall consumer credit management?



🟦 Credit Line Decrease


CLD is a common risk management strategy for revolving credit accounts.


It includes:


a) High Risk CLD - line decrease of high risk accounts, mostly are active but some could be inactives.


b) Inactive CLD - line decrease of low-risk inactive accounts.


The idea is to reduce high risk exposure and shift exposures to more profitable accounts.


In my case, the 60%+ line decrease was on an inactive account.



🟩 The Recent History


The frequency of CLD is typically between 1%-2% of total accounts.


However, it does go up during the early phase of a recession, as seen in 2020.


The graph below shows the typical credit line increase in the US was interrupted in Mar 2020 - a combined effect of more CLDs and stopped CLIs.


Source: CFPB


The most noticeable downward shift actually happened to the Super-Prime segments, during a period of severe consumption suppression.


The stagnant/decreased trend was reversed in early 2021, as the government assistance and private forbearance programs avoided large-scale defaults and boosted household finance.



🟧 The New Phase


The year 2022 carries us into a new phase - high inflation, fast-rising interest rate, and dampened economic prospects.


Will we see another wave of CLDs?


With higher prices and consumer consumption still active for now, the strategy needs to be a balanced and targeted one.


In the same month I received the CLD, I got a CLI on another card.

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