This Crazy World !

Remember those companies that make their living by assessing credit risk ?   Yes.  Those same ones that bestowed a triple A rating on bundles of home mortgages that were sold as derivatives and which caused the massive recession that hit the world in 2008.

It seems that these " Gnomes of Zurich " are now proclaiming that anyone who has a big unused credit card credit limit is  a bad credit risk.  That could lead to rejection of loan approvals for such measures as a new mobile phone contract or signing on for one of the services that screen movies to your television.

You assume you have a good credit rating if you pay your bills on time every month - and settle them in full each time.  Due to some strange alchemy in the minds of these credit people that is not enough and the presence of an unused high credit card limit will now be regarded as a danger signal, and  they are about to get a whole lot more people in their sights.

The government has installed a new credit reporting system and draft legislation released this week seems to ensure that it will force the banks to join and bring with them about eighty percent of all credit lending.  This legislation has the intent in making the banks comply by this coming July.

A couple of decades ago the banks were criticised for automatically upgrading customers credit limits - unasked.   It was common to get a congratulatory letter from the bank, praising the way you handle your account and advising that your credit limit for Visa or MasterCard had been increased as a reward.

Few people wrote back and rejected this upgrade.  It brought a nice feeling and most people took it as a sign of their enhanced credit status and it was comforting to know that such credit was immediately available in any emergency.

In Australia, the average credit limit is now $ 9143 and this is the highest since June, 2012 when credit card reform required consent from customers to increase limits.  The days of these automatic credits being foisted on customers were over.  Credit card statements now warn of both the length of time to remove the debt and the interest that will accrue if the customer pays just the bare minimum each month.

The credit revolution hit Australia when the banks combined to offer credit by way of " Bankcard " ! Prior to that - when the advent of television saw the massive purchase of television receivers - the usual form of payment was called  "  Hire Purchase "  or more colloquially - the " Never-Never " !
Not all people are good money managers and many got into severe financial difficulties and found that credit was a trap from which it was difficult to emerge.

Now it seems we are entering a new cycle.  If you have a high but unused credit limit that seems to infer you doubt your ability to repay - or it would be maxed to the limit.   Perhaps the intelligence of these credit assessment companies is still stuck in the same rut that threw the world into financial recession back in 2008 !