With millions of people out of work due to the coronavirus (COVID-19) outbreak, some Americans are using more of their existing credit lines. Anxious lenders are worried about repayment, and many credit card issuers are trying to figure out who still has a job so they can decide whether to let consumers keep spending or reduce their credit limit.
How Creditors Find Out About Your Job and Income
Lenders and creditors verify employment and income when consumers apply for loans and credit cards. But that kind of information becomes difficult to confirm over time as people change employers or get laid off. So, how do credit card companies get details about your employment and income after you’re already a customer? Here are a few possibilities:
- The credit card issuer might come right out and ask you when you log in to the company’s website to view your statement online. Usually, a pop-up screen asks you to verify information, like your source of income. (Under the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, issuers also need your wage information before offering you a credit limit increase.)
- A credit card company can also pull your credit reports to see what employment data is listed. Under the Fair Credit Reporting Act (FCRA), an existing creditor can monitor your credit, which is considered a permissible purpose under the FCRA. Your credit reports might contain some of your employment history, like your employer’s name and perhaps past workplaces. But credit reports don’t have data about your pay rate, and might not even list your employer.
Some Creditors Use an Employment Database
Another way that lenders and creditors can learn about your current finances is by checking an online database of salary and employment information. One such database is Equifax’s The Work Number, which provides employment data reports. These reports contain information about you from employers, including your:
- current and past employers
- income and deductions
- whether you have insurance
- average hours per pay period
- pay increases (next scheduled and last), and
- if you’re getting workers’ compensation.
This database contains payroll data on 100 million workers from over 600,000 employers in the United States.
What Might Happen If You’ve Lost Income
If your credit card company finds out you don’t have a job or you took a pay cut, it just might reduce your credit limit—usually without giving you notice of the reduction. (For most other significant changes to a credit card’s terms and conditions, like a change to the APR or annual fee, the CARD Act requires issuers to give you 45 days’ notice before making a change. But issuers don’t have to inform cardholders that their limits are being cut, subject to a few exceptions, like if the smaller limit results in you getting charged an over-the-limit fee.) According to a survey by CompareCards in late April 2020, 25% of cardholders had their credit limits lowered, or their accounts closed, in the past 30 days.
If your credit card issuer lowers your credit limit and you’re not happy about it, you may contact the company and make a case for yourself. If you have a record of on-time payments, tell the issuer. If you’re still employed or have another source of income, give the credit card company that information too. You might be able to get your previous limit restored.