Get ready for yet another sign of the tough financial times. In an effort to cut the losses from charged off and delinquent credit accounts, credit card companies are starting to look at much more than your credit score and history, like your job and where you live. The new criteria go beyond whether you simply are approved or denied for a card. Existing customers are seeing their credit lines being drastically reduced without warning, some by as much as $50,000.

Where You Live
We know that banks are starting to use new and complicated application criteria to weed out potential ‘bad’ loan customers, and credit card companies are hot on their heels. Customers who live in areas hardest hit by the housing crisis, such as California, Nevada, and Florida will either be outright denied, or have a much lower credit line than people in neighboring states. Marketing campaigns in those areas and others have been limited, and automatic credit line increases have been halted.

What You Do
Your job may also determine your credit worthiness, and we’re not talking about how much you make a year. People with jobs in finance, construction, and even entertainment industries are being targeted as ‘high risk.’ Even those who have been faithful, paying customers for years suddenly are finding themselves curtailed. From The Wall Street Journal:

Peter Schiff, president of securities-brokerage firm Euro Pacific Capital in Darien, Conn., has been downbeat on the economy for months but never thought he was the kind of customer that AmEx would worry about. That changed a few months ago when one of his employees tried to book a block of hotel rooms for a seminar on the firm’s corporate AmEx card. The card was declined, and Mr. Schiff subsequently discovered that AmEx had cut his $40,000 credit line to $4,500.
(WSJ Online, by Robin Sidel, Monday, June 23, 2008)

Cardholders who find themselves with slashed credit lines are being asked for a lot more personal information than in the past. Small business owners in particular are being essentially audited to make sure of their solidarity. Credit card companies are hiring third parties to do their research work, finding trends, identifying risky customer groups, and conducting investigations on those ‘at risk’ cardholders.

This practice, while designed to minimize loss, may backfire. Many customers who find their credit lines cut or interest rates inflated are trying to contact their credit companies to either demand explanations, or to have their previous status re-instated. Almost all of them are finding those companies unyielding. Usually the customers will close the account and look elsewhere for the limits they had previously. An even worse scenario is one where a customers credit limit is cut or their interest rate is raised to the point where they will fall into default even quicker.

Each companies criteria for selecting customers is different, which is why it is possible for one company to deny a customer and another to approve them. The techniques for determining customer risk are usually a closely guarded industry secret. What most are saying is that FICO scores need to be higher, and that across the board banks and credit card companies are getting much more selective and conservative.