A final round of new credit card rules intended to protect consumers goes into effect on Aug. 22. Many of the credit card companies and banks are cutting credit limits, fees and rates on their credit in order to help bring these new laws into place. The majority of the time when the economy is down so far, credit limits are cut like this. But cardholders’ credit scores get hurt by it, through no fault of their own. To help your credit limit stay the same or get higher, you will find things you can do.
Credit card limits all dropping
During the recession, most credit card companies are harder on their consumers. Many credit card-issuing banks are trying to rein in risk amid increasing delinquencies and charge-offs — and before the final round of new credit card rules goes into effect. Bankrate.com reports that even cardholders with good credit scores are getting their credit card limits slashed. Dennis C. Moroney, research director of bank cards at TowerGroup, told Bankrate that credit card companies are reducing credit lines and closing accounts. He said that even people with higher scores that have been cut down from 750 to 720 are having trouble getting credit.
Correlation between credit limits and credit scores
More than 60 million cardholders have had their credit limit slashed over the past few years. According to Credit Card Guide, quite a couple of of these people having their credit limits cut down have not done anything such as regular late payment or high credit card balances that are called “risk triggers”. Having your credit limit cut isn’t really just an inconvenience for people. It really hurts credit scores when a cardholder has an outstanding balance also. With the debt-to-credit ratio weighing in second among the most important factors contributing to credit scores, credit line cuts are no small concern.
Helping your credit card limits
Eva Norlyk Smith at Credit Card Guide has some tips to help anyone who would like to increase or keep the same their credit limits. First of all, simply call and ask. Once a year most credit card accounts can get a credit limit increase. Always pay down the balance in full every month. And use the credit card a lot, but don’t exceed 50 percent of the credit line. Always send within the payment on time. Don’t cancel credit cards you already have, don’t get any new either, and don’t get a credit check through your credit card company. A credit check is just as bad as applying for a new card.
Further reading
Bankrate
bankrate.com/finance/credit-cards/credit-card-issuers-slash-credit-limits-1.aspx
Credit Card guide
creditcardguide.com/creditcards/credit-card-tips/higher-credit-limit-6-dos-donts-342/
