Behaving responsibly with your credit is no guarantee that the credit-card companies won’t make unwarranted changes to your terms.
Let’s say you’re a responsible credit user who is never late making credit-card payments, pays more than the minimum each month and keeps your balances below 30 percent of available credit. You have high credit scores, and you’re proud of that fact. You believe that as long as you continue to handle credit in a responsible manner, your scores will stay high, allowing you to get excellent interest rates when you apply for loans.
It’s not necessarily so. Your scores can drop anyway.
Take this example: You have a card with a $10,000 available credit limit. You keep your balances down around $3,000 — approximately 30 percent. Without any good reason (except that it just wants to), your credit-card company drops your available credit, perhaps down to $5,000. Suddenly your credit usage appears to be at 60 percent. Your credit scores will fall based on using too much of the available credit, without your having done a single thing wrong.
An even worse case is when the card companies lower your available credit every month down to the level of your new balance: Make a payment, and the result is your new credit availability, and you’re using 100 percent of it. It appears that you’ve maxed out your card.
If this happens to you, you’re not alone. Credit-card companies have cut available credit to many. Now, per the new laws, they will have to warn you in advance, but it likely won’t be in time for you to pay down balances so that your percentage of credit used stays low. One-third of your credit score depends on how well you stay within the limits of your available credit.
Keep a sharp eye out for information leaflets from your credit-card companies. You might be told that your new minimum payment will be an increased percentage of the existing balance, or that your interest rate is rising, your due date is changing or your available credit is being slashed.
Then look at your credit-card statements each and every month to see if those changes have taken effect.
As always when dealing with credit-card companies: beware.
Uffington does not personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail to columnreply@gmail.com.
Let’s say you’re a responsible credit user who is never late making credit-card payments, pays more than the minimum each month and keeps your balances below 30 percent of available credit. You have high credit scores, and you’re proud of that fact. You believe that as long as you continue to handle credit in a responsible manner, your scores will stay high, allowing you to get excellent interest rates when you apply for loans.
It’s not necessarily so. Your scores can drop anyway.
Take this example: You have a card with a $10,000 available credit limit. You keep your balances down around $3,000 — approximately 30 percent. Without any good reason (except that it just wants to), your credit-card company drops your available credit, perhaps down to $5,000. Suddenly your credit usage appears to be at 60 percent. Your credit scores will fall based on using too much of the available credit, without your having done a single thing wrong.
An even worse case is when the card companies lower your available credit every month down to the level of your new balance: Make a payment, and the result is your new credit availability, and you’re using 100 percent of it. It appears that you’ve maxed out your card.
If this happens to you, you’re not alone. Credit-card companies have cut available credit to many. Now, per the new laws, they will have to warn you in advance, but it likely won’t be in time for you to pay down balances so that your percentage of credit used stays low. One-third of your credit score depends on how well you stay within the limits of your available credit.
Keep a sharp eye out for information leaflets from your credit-card companies. You might be told that your new minimum payment will be an increased percentage of the existing balance, or that your interest rate is rising, your due date is changing or your available credit is being slashed.
Then look at your credit-card statements each and every month to see if those changes have taken effect.
As always when dealing with credit-card companies: beware.
Uffington does not personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail to columnreply@gmail.com.