IMPROVE CREDIT RATING

The credit card meltdown comes on the heels of the subprime mess. Credit card companies are slashing the credit limits of many cardholders. About seventy-five percent of the banks are lowering credit limits in hopes of reducing their possible risk. This could however affect consumer’s credit scores.

The bad thing about credit card limit reductions is that more and more people do not know that their limit has been lowered and continue to us the credit cards and go over their credit limits causing over the limit charges to be added to the monthly bill. This is hurting consumers where it hurts the most, in their wallets.

Credit card companies are saying that by lowering credit limits is a better way of managing possible risk rather than raising the interest rate on their credit cards. However, if the customer does not know about the credit limit reduction, it is causing more money for the customer in over the limit charges, which is not seen until the bill comes in the mail.

Credit card companies are lowering credit limits for cardholders who are taking out loans, even, home equity loans and people who apply and receive more credit cards. As soon as someone activates the credit card, the older credit card companies are slashing credit limits to protect themselves from possible financial risk if the borrower defaults due to over extending their credit spending.

This does make sense for many reasons. Credit cardholders sometimes use the card foolishly causing them to over extend themselves and then have problems paying the monthly bill. Credit card companies feel a need to protect the consumer from himself or herself, therefore, will lower the line of credit. This is all fine if the cardholder is aware of this change before making additional purchases.

The Fed has recommended a few new rules or guidelines that they feel will protect the consumer from financial ruin when applying for a mortgage. They have advised lenders to consider the borrowers financial ability to repay the loan and verify income sources. This is to help the borrower refrain from over extending himself or herself and not have the ability to repay credit card debts and a mortgage.

What this means for mortgage and credit cardholders is that you will no longer have all the credit you need or desire so you should look for mortgage that fits your budget and refrain from holding credit cards that have limits that allow you to over extend yourself as far as your ability to repay the monies back.

Related links:

FREE copy of Experian credit report

Equifax Triple Protection Watch