As if life was not hard enough during this economic crisis, another effect secondary of the credit crisis is that your credit score could drop even without any negative information is added to your credit report! This is true even if you are able to continue to pay all your bills on time, and repay all your credit card balances in full, your credit score can still go down.
Therefore: a key component of your credit score is the percentage of your available credit you use. With lenders, such as credit card companies, increasingly strict in their lending standards, many of them are already lowering credit limits for a large number of clients. Their reasoning is that even if nothing has changed with the customer's credit profile, the bad economy makes the customer a worse credit risk than they were in a good economy.
Okay, fine, but now someone who had $ 25,000 available credit can only be $ 15,000. And that person might have used an average credit of $ 7,500 each month. Even if that person does not do anything differently, they just went from 30% using their credit at 50%. That's a big difference that will likely reduce significantly their credit score!
Worse, since the suitable standards are higher, qualifying for the same loan today against a year ago requires a higher credit rating. But yours will probably be lowered without doing anything. Of course, your credit score can go even further if you are unable to pay some of your bills on time.
If this all sounds pretty bad, well, it is. But there are some things you can do about it. First, check your mail. By law credit card issuers must inform you of a change to your credit limit.
Second, monitor your credit score. The best way to do this is to sign up for a credit report and score monitoring service. You can read our comparison of credit monitoring services to find the best for you. Our first choice is Identity Guard, which gives you reports and scores from all three credit bureaus each quarter, monitors any changes to your credit report within three offices every day, and gives you an amazing array of protection against identity theft and Internet security features. If you think you might make a large purchase that requires a loan in the near future, you might opt for CreditCheck Total, which gives you unlimited access to all three reports and credit scores, which means you can check your score credit updated every day if you want. All of our key recommendations offer free trials so there is no obligation and you can get your free credit score.
Third, if you know that you currently have a good credit score, apply for a new credit card. Although the limit can not be as high as you have qualified for the last few months, regardless of the credit you get can help replace the lowered limits on your existing cards. This is an even better idea if you carry a balance on your credit card, as you can enjoy low rate balance transfer introductory or 0. Read our comparison of the best balance transfer cards to find the best for you or if you do not want to transfer a balance, see Choosing our editor of the best credit cards in different categories. Of course, if you're credit is not good, not to apply for a credit card that you think you might be refused because a new demand for credit may slightly lower your score.
We hope you find this information helpful. Check back soon or subscribe to our RSS feed or email list that we will continue to provide advice to help consumers through these difficult economic times.