Gone are the days when credit was granted to nearly everyone with a name and SSN. In today’s economic climate, credit card companies are becoming more conservative about the choice of their potential customers. Lenders apply tighter restrictions on credit availability making it more difficult for new customers to be approved for a card.
Credit scores are three-digit numbers that determine whether you’ll be approved for a loan and how much you will pay for that loan. Just a couple of years ago, someone with no or limited credit could easily be approved for a new credit card. Not the same thing today. Banks and companies have become more cautious due to the unfavorable economic climate.
Millions of US consumers see their scores dropping. The falling scores have become a trend of the harsh economic times. With high unemployment rates and plummeting house values, many people are experiencing late payments and foreclosures.
Lenders, in their turn, are doing their hardest to offset their ever-increasing losses. Credit card limit cuts and interest rate hikes have a common occurrence in the United States. Needless to say how these credit card changes may affect a customer's FICO score. It's a vicious circle. While lenders raise their minimum credit requirements to deal with solvent borrowers, they slash the limits and raise interest rates by making it more difficult for customer to maintain good credit.
A good credit rating is a must-have not just for borrowers. FICO scores can also be screened by insurers, landlords and even employers. This way, your scores may affect your insurance rates and even your job position. So, the question is: how to fix or maintain your scores?
When it comes to improving your FICO score, it's vital to know the factors that determine your score. One of the most important factors is your payment history. Paying your bills on time is not just a healthy payment habit, today it's a must for everyone who wants to keep their scores in good standing. Make it a rule to pay your bills when they arrive. You may also schedule your bill payments in order to avoid late payment penalties.
A healthy debt to available credit ratio is one of the major factors determining your FICO. By keeping your balances far below your available limits, you're sure to keep your debt to available credit ratio in good standing.
With interest rates ever-increasing, you may be enticed to close your old high-rate card. You should resist that urge, as closing a credit card will shorten your credit history. The length of your credit history is one of the key components in scoring formulas, so you'd better keep your old accounts open.
And finally, before applying for a credit card, be sure to know your current FICO score rating. Some holders may not know their actual scores, while these three-digit numbers may fluctuate greatly over time. Check your FICO and apply for the card that best fits your needs and your current score rating.