FICO shoe to drop

As this link is stating, the big banks, facing the long-anticipated credit-card bust looming over them, are likely to severely cut available credit lines. Rightly so, given that in a financial panic those most likely to use credit are the least likely to be able to repay. But this will actually have a double-whammy on credit, since part of everyone's FICO score is the percentage of personal credit already used. Once credit lines are slashed, every holder of one of those lines of credit will get a commensurately lower FICO score, and, thus will not be able to borrow as cheaply as before.

Whether banks give a broad-based haircut to credit-lines, or base them on current credit utilization will remain to be seen.