Pay attention to credit card limits
March 3, 2008
I recently read a story that surprised me regarding credit cards. Exceeding 50 percent of your credit limit can lower your credit score, according to an article on AllBusiness.com. It doesn’t even matter if you make all of your minimum payments on time.
Who knew?
I didn’t. And apparently many other people don’t know this little, but important, tidbit.
Hitting your credit limit can cause your credit score to plummet by as much as 100 points, according to the article. And, the best way to raise your credit score is to keep your balance below 30 percent of your credit limit.
Just because your credit card has a limit of $10,000, that doesn’t mean it is okay to charge, charge, charge … even if you are paying your bills on time.
Here are two other financial facts many people aren’t aware of. First, lenders can raise your interest rate on your credit cards without informing you. Secondly, other lenders can also raise your interest rate because of your lower credit score or if you miss a payment to a different lender. Yep, that’s right. Miss a payment to creditor No. 1, and creditor No. 2 can increase your interest, too.
AllBusiness.com recommends borrowers check their credit card statements every month. If you see an increase in your interest rate, call your creditor immediately and ask why your rate was raised. If your lender says it is because your credit score dropped, ask them to send you a copy of the credit report they used. If there are inaccuracies in the credit report, correct them by contacting the proper credit reporting bureau. If your credit score hasn’t dropped, call your lender back and demand a detailed explanation as to why your interest rate was raised. It is important to be aware that, as of now, banks can raise your interest rates without a cause.
Congress is beginning to look at lending practices and banking policies. In the meantime, borrowers need to be savvy about their creditor policies and keep close watch on their finances.
Anyone who is concerned about their credit card balance or is having a hard time making their payments should seek help. The certified credit counselors at Advantage Credit Counseling Service will guide you through a free credit counseling session and can offer suggestions to help you get back on track financially.
Call (888) 511-2227 or visit www.advantageccs.org to set up an appointment.
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