jump to navigation

New Rules For Good Credit July 18, 2011

Posted by CredZoo - Tame Your Credit in New Credit Information.
Tags: , , , , , , , ,
trackback

Remember those long-standing guidelines like closing old credit card accounts, never maxing out cards and asking for lower interest rates? Well, according to MSN Money, you can forget them now.

The rules that credit card companies have to live by changed dramatically with the enactment of new regulations in 2010. Now some of the rules for consumers striving to maintain good credit are changing, too.

For the most part, cardholders would still do well to pay on time, keep their balances low and refrain from applying for too many credit cards at once. But some of the old guidelines may not always hold up, as credit card companies continue to adapt to the new environment and look for ways to run their for-profit businesses.

With the help of some easy — if often counterintuitive — steps, you can improve and retain healthy credit scores even in today’s credit environment. Here are five:

1. Open more credit cards

For years, experts warned that opening new credit cards hurts your credit score — not to mention enabling you to run up huge debts. That’s still true: The length of your credit history and new credit make up 15% and 10%, respectively, of FICO scores. But with credit issuers lowering credit limits left and right these days, having too few credit cards puts a much more important credit-score component at risk: credit utilization, or how much of your available credit you’re using. Credit utilization makes up 30% of your score.

2. Max out (some of) your credit cards

A quirk of credit score math makes it advantageous to max out certain cards. How? It’s a matter of what the issuer tells the credit bureaus.

Some types of cards don’t report credit limits to the credit bureaus. They include all charge cards from American Express and some high-end credit cards that are marketed as having no preset spending limit, such Visa Signature and MasterCard World. (These cards have credit limits, but cardholders can exceed them and must pay off the excess in full on the next bill.)

3. Don’t ask for a lower APR

In the old days, consumers were encouraged to call their credit card companies and ask for lower interest rates. “There really wasn’t a downside to doing that,” says Gerri Detweiler, an adviser with Credit.com.

“These days, if you call, you may trigger an account review.” Should that happen, and the credit issuer not like what it sees, it may cut your credit limit or actually hike your interest rate. This is where having multiple credit cards may come in handy, Detweiler says. “Don’t make that call unless you have a backup card where you could transfer that balance.”

4. Closed a card? Don’t pay it off

Under the old rules, interest-rate hikes applied to both your existing balance and future purchases. Since the Credit CARD Act went to effect, lenders have been limited to applying rate increases only on balances going forward. That said, if you closed an account before the law took effect to opt out of a rate hike – or have closed one since — you may not want to rush to pay off every last penny of the balance.

In a little-known quirk, FICO counts the credit limits of closed accounts toward utilization ratios only as long as there’s a balance on that account.

(From MSN Money)

Advertisements

Comments»

No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: