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should review inactive accounts before sending renewal cards, as there is a fraud risk if cards are delivered to out-of-date addresses."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.
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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, 2012. 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.
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