Posted by Lending Club :: November 6, 2008 @ 6:08 am

There have always been factors outside our control that affect the ability to get credit. The current economic situation in the United States is a prime example. Even if your credit score remains unchanged, you may have a harder time obtaining credit because of a general tightening in the market. To make things during this difficult time even worse, a controversial policy used by American Express is starting to come to life.

According to MSNBC, American Express now factors your mortgage lender, geographic location, and shopping preferences into their determination of appropriate credit limits. So if you charge purchases at a store where people with higher credit risk tend to shop, you might see your credit limit reduced. Which stores have this effect were not disclosed. Living in an area near people with a higher credit risk could have the same effect.

While you have some control over where you live and shop – though you shouldn’t have to change those habits to keep your current limit – the company that holds your mortgage is completely beyond your control. In many cases your mortgage can, and will be, sold to another company on the secondary market regardless of whom you actually use for your loan. When I bought my first home, between the time when my offer was accepted and I went to closing, my loan had already been sold.

While American Express is the only card issuer admitting to this practice, it probably won’t be long before others disclose similar strategies or begin such programs. While these companies are trying to protect themselves from the risk and uncertainty in the credit market, it sickens me that they would go to such lengths. The practices may be legal, but they are certainly slimy and show a general disregard for customers. Add this practice to the growing list of reasons to use person-to-person lending and avoid credit cards altogether.

Have you seen your credit limits been reduced without a just reason? Please share your story with us.