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| Is Your Credit Limit in Jeopardy? |
Submitted by:
Tip Hero 03/24/2009 9:22 AM
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If you use credit cards and don't want the banks to lower your credit limit or even cancel your credit cards, you need to be aware of your credit score and stay on top of your accounts. Furthermore, you should be aware of how credit scores are calculated.
That's according to a column recently posted on Bloomberg.com. John F. Wasik shares some tips on how to protect yourself -- even if you think you're in good standing with the credit card issuers.
As the worldwide credit crunch has hit home in the form of reduced credit-card limits and home-equity lines, not all of this curbing is fair. In many cases, you may be targeted by zip code or other invisible criteria.
So what steps can you take? Mr. Wasik explains (emphasis added by us, in bold):
The bottom line in personal credit is to maintain the highest credit score possible. While there are several scoring systems, the best known is the FICO program. Unfortunately, the exact details of how credit bureaus calculate scores, mostly determined by Fair Isaac Corp.'s system, are a trade secret.
Generally, any FICO score of more than 750 translates into the lowest finance rates on everything from cars to mortgages. But a good credit rating means some maintenance on your part and some of the advice is counterintuitive.
Don't close underused or inactive accounts. It may lower your FICO rating. Part of the FICO rating, according to their Web site http://www.myfico.com, is what the industry calls a "utilization ratio." This is how much credit you are using relative to your limit. If you close an account and it raises the ratio, it may lower your score...
...The major credit bureaus give the highest ratings to those who pay on time, have had several cards for many years and have made relatively few credit applications.
Mr. Wasik also notes that "your credit score may drop if you are constantly applying for credit over a longer period of time," and suggests that you contest any mistakes you find in your credit score immediately and ask for "rapid rescoring" to get your report updated immediately.
To read the full article, click the link below:
Don’t Allow Banks to Mess With Your Credit Score
Search for free credit reports
Search for low interest credit cards
Photo credit: SqueakyMarmot |
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