(See the accompanying video for the complete interview.)
“About five percent of the population did have something funny in their records, or risk triggers that caused their lines to be decreased,” he told CNBC. “But, about 15 percent of Americans certainly didn’t do anything. The banks decided on their own to cut their credit lines.”
A “surprising” amount of these customers are high-end consumers with very good credit scores, he said. The reason behind this likely was the banks' desire to clean up their balance sheet by freein up some regulatory capital.
However, this is bad for consumers. If the banks report loan modifications to the credit reporting agencies, FICO will interpret the move as a negative and credit scores are likely to weaken further. (For more on new loan modifications, read "On the Money" contributor John Ulzheimer's blog below).
How New Loan Modification Guidelines Damage FICO Scores
The reduction in the amount of credit consumers have has flattened the curve of FICO score, with more consumers falling into either the low-end or the high-end of the scoring system.
“People sort of at the low-end of the range have been in trouble recently,” he said. “What you might not guess though, is that the high-end consumers, who have always done a good job managing their credit, have done an even better job these days. So, what we see is sort of a flattening out of the distribution curve.”
Greene also advised consumers to ensure their accounts remain active, to only apply credit when needed, use some but not all of the available credit, pay bills on time and save.
“The banks are not going back to the willy-nilly days of everyone can get a loan without documentation,” he said. “No more ninja loans.”
For More on Credit Scores on CNBC.com: