Credit Cards are Causing Damage to Your Credit Score
A new survey from the Federal Reserve shows that, despite how consumers are being hurt in the current economy, banks continue to raise the interest rates and lower credit limits with most credit cards. Not good for those who are already struggling,, since studies consistently show that the single source that causes more people problems with their credit reports are their credit cards. Specifically, the person uses his Visa or MasterCard to get out of a financial crunch, but when that crunch does not abate, he finds himself unable to make the card payments. The result: one hit after another to his credit score.
Consider the situation:
* In the U.S., 54 percent have either already increased or plan to soon increase the credit card APR, even on their good customers. And 74 percent have or will increase it on those with poor credit.
* More than half of all banks intend to cut, or have already cut, the credit limits of credit card holders.
A few in Congress have taken note of the situation and plan to introduce legislation to provide relief for credit-card users. However, it's likely that any legislation, if it passes, will be months or years before offering any real relief.
In the meantime, there are things the consumer can do to minimize the damage that credit cards to his credit score:
1) If you learn of coming rate hikes with your card, find out of there is an "opt out' option. If so, take it and leave the account open. this will allow you to pay off your current balance at your current interest rate. This will ensure that the card does not negatively impact your credit score.
2) If you are only able to "opt out" by closing the account, it's still better to go ahead and do that. This way you'll still be getting the lower interest rate on the balance. And if you have other cards with no balance, closing one of them might not do that much damage to your credit score.
3) If you know that your credit score is still fairly high, then it might be time to shop for another card. There might still be time to get one, and the new card's available credit could cancel out issues with an account that you're force to close.
4) If your credit card has already done some damage, then it's time to put normal credit-repair strategies into play. This means first of all, getting a free copy of all three credit reports and scanning them for any inaccurate entries. Contact the credit bureau and contest the inaccuracy (They will then be forced to either delete the entry or prove its legitimacy). Next, your number one goal is to get all past-due amounts reported as "current," so as soon as possible, work with debt-collectors to bring the accounts up to date, and pay off any charge-offs. And of course, bring any credit cards that are maxed-out down below your credit limit (since a maxed-out limit takes points off your score). Continue working to pay of these card balances.
Your credit score won't be fixed overnight, but if you act responsibly, you can be sure that there is "credit light" at the end of the financial tunnel.
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