Wanda Wilkinson

Here I go again talking about credit cards, but it’s an issue all over the news right now and I can’t ignore it.  The fact is, credit card companies are lowering credit limits on open and active credit card accounts.  And don’t think just because you make your payments on time that you are immune from this.  Credit card issuers are not just focusing on people with late payments or delinquencies, they are attacking anyone who has available credit…  The reason behind this is to limit the risk of people running up high balances and then defaulting on the unsecured debt.  Great for the credit card companies, bad for consumers.
 

By doing this, people’s credit scores are suffering.  Remember, 30% of your credit scores are calculated by debt utilization (current balance divided by available credit limit).  If credit limits are lowered and balances remain the same, debt utilization goes up and credit scores go down.
 

Because consumers have no control on what credit card issuers are doing, we must focus on doing things that will limit the negative effect this will have on credit scores.  First, we should all get in the habit of contacting our current credit card companies every six months and ask to have limits raised—the more available credit the better.  Second, explore the idea of opening a new credit card.  Having another credit card will add more available credit to the mix and lower aggregate debt utilization.  Third, work on paying down current balances.  Also, getting in the habit of only using 10% of the available credit limit and paying off the balance each month will ensure that your debt utilization ratio is not keeping your credit scores lower than they should be.  All three of these things will help to increase credit scores.  Be careful though…  There are definitely negative issues to consider when increasing credit limits or opening new cards, so take a look at the big picture before doing either of these things.