CHESSNOID

I received another interesting post in regards to Amex that got me thinking about credit scores aka FICO.  This is what Kirk commented:

Same here, they haven’t lowered my credit limits yet, but they shutoff my flex pay on the #1 account I use for my business. They did lower the limit on 2 other cards I have 1 was like all of you 100 over what was owed so I had a over limit fee. Being a small business owner I rely on Credit to stay afloat. If this is happening to other small businesses it wont be long before we can’t make payroll and start laying people off… DEPRESSION HERE WE COME!! I’m not really worried about my credit score just for the fact that getting credit is impossible now anyway..

From Recession is forcing American Express to reduce credit lines for no reason,

This is an interesting point.  I have perfect credit right now and can’t get any more new credit.  What good does it really matter from a business point of view to keep credit perfect.  I also own a small business and this has affected me more than I realized.  We are back on a cash basis only.  This makes it much slower to grow and  more challenging to manage the accounts receivables.

Today, Amex announced it beat forecasts on reduced earnings.  AmEx: 24% profit drop, better than forecasts

American Express reported revenue of $7.16 billion in the third quarter, up by 3% from $6.96 billion in the same quarter last year, but slightly lower than forecasts of $7.31 billion.

The company also said that it expected the global economy to continue to weaken well into 2009 and it hinted at layoffs.

The third-quarter report came on the heels of a sour second-quarter report. Profits sunk 38% in that quarter and American Express (AXP, Fortune 500) warned that deteriorating economic conditions would hurt the company.

Write-offs of bad loans continued to increase in the third-quarter, and the company said it set aside “significant additions” to cover loan losses.

Overall, the company said its loan provisions were $1.4 billion, up 51% from the same period last year. American Express set aside $941 million to cover losses in its U.S. card segment, up from $638 million a year ago.

The loan write-off rate for U.S. credit cards was 5.9% in the third quarter, up from 5.3% in the second quarter and significantly higher than 3% one year ago. And the company’s profits from U.S. credit cards fell nearly 59% to $244 million.

With credit card holders struggling to make payments on time, American Express chairman and CEO Kenneth Chenault said in a statement that the company will be more selective in who it will lend money to in the future.

Long term, I think the Amex CEO is creating more problems for the company. Amex’s clientele is already the more upscale person already established. It has been a big turn off the way the company has handled its portfolio. In a word, they suck. I truly think this could have been avoided, and I predict they will have bigger losses in the future. Without a doubt, I think the negative attitude that it helped foster among its users will hurt it in the long run.

Credit is definitely a privilege and not a right.  That is why when we have paid on time and never ever been late, the attitude of paying on time doesn’t seem to matter.  Basically, the company took away credit when I was perfect the same way as if I was delinquent 6 months and treated me the same way.  When I called to find out why initially, instead of being told the truth, I was told lies. There was no change in my financial picture, nor my credit score.  Many of us already get the FICO updates through one of our credit cards for free.  Instead of owning up to what they were doing which is transparent now, they were being disingenuous.