To reduce their massive exposure to bad debt, banks are closing inactive accounts, reducing credit lines, and raising interest rates. They can do this even if a borrower has never missed a payment. And when the bank reduces your line of credit, it can damage your credit score, and start a dangerous spiral of default.

According to the Financial Times:

A lower credit score can prompt other lenders to cut the borrower’s access to credit and to raise interest rates.

For borrowers on the margin, this sequence of events can be enough to tip them into default…

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