Is your credit score suffering without your knowledge?
The warning signs were there as early as July. Even if your credit card interest rates aren't going up, your credit limit might be going down. If you're like me, and you tend to shread your credit card statements as soon as you receive them, you might want to open them up and ascertain that your credit card company hasn't suddenly lowered your limit.
It's not just your portfolio that may be shrinking lately. The spending limit on your credit card may be heading south as well. Credit-card issuers have been decreasing credit limits.
"Most banks are cutting their credit limits," says Carol Kaplan, spokeswoman for the American Bankers Association. "They're doing it to everyone."
To maintain a good score, Ulzheimer recommends that consumers use only 10 percent of their available credit. For example, someone with a credit limit of $100,000 should never carry a balance over $10,000. But in today’s climate, however, that $100,000 limit could be cut to $50,000, meaning that the $10,000 balance now represents 20 percent of your credit limit, and thus your credit score is dinged. Your score could go down even if you regularly pay off your minimum balance and your loans.
With delinquencies mounting by the day, credit card companies are going to try to limit consumer lending, not just in new loans and lines of credit, but with existing ones. Companies are looking at your salary, current debt, job, and locale to figure out if you are a riskier investment than you were, say, six months ago.
If you haven't gotten your free credit score this year, you might want to consider doing so. Keep an eye on your credit card limits, too, to see if they have shifted. It's not against the law for a credit card company to suddenly lower your credit score below the amount you currently owe, thereby inducing a whole boatload of over-limit penalties. Remember, when it comes to debt, credit card companies can do pretty much whatever they want.
Want to protect yourself?
- Pay down as much of your debt as you possibly can.
- Haggle with your credit card company to keep your credit limit at its current level.
- Keep an eye out for any mail from your bank or credit card company - don't just shred them!
- Know your credit score (click to read about a way to get your score for free).
I hate facing debt when I know I have a lot of it, but let's face it, folks, this problem isn't going away anytime soon.