Credit scores hit by card limits

[onehandle]

Source: AP

NEW YORK - Just as Americans grow more reliant on credit cards to help pay monthly bills, they're being hit with a one-two punch: Card companies are reducing borrowing limits for tens of thousands of consumers, which then can lead to lower credit scores.

Those facing this predicament might not even know it until they apply for a loan or another credit card, and then get denied because their credit score has dropped.

This is an unintended consequence of the financial world's widespread ratcheting down of risk. Banks and other card lenders are trying to better protect themselves from more massive losses like those they've seen from subprime mortgages.

As a result, they are looking for ways to reduce their exposure to cardholders more likely to default. That's why they are lowering credit limits, which means they are reducing the maximum amount of credit extended to an individual, along with boosting card interest rates and allowing fewer balance transfers.

Read more: http://news.yahoo.com/s/ap/20080628/ap_on_bi_ge/all_business

[Triana]

1. There is something you can do...

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3530142&mesg_id=3530142

[FarCenter]

2. Yes -- pay off the balance

Carrying a balance on credit cards at current interest rates is extremely damaging to your financial well being.

[AP]

4. Pay off secured loans (like mortgage) before you pay off unsecured debt (credit cards), if you have

a choice.

However, pay off high interest loans before low interest loans.

[FarCenter]

5. Pay off credit card debt and loans before mortgages

First, the credit card debt usually comes with a higher interest rate of 12 to 28%, while mortgage interest rates are in the 5 to 10% range usually, depending on when you originated the mortgage.

Second, mortgage interest payments are tax deductable, so paying down a 6% mortgage is equivalent to investing in a 6% certificate of deposit.

On the other hand, credit card interest is not tax deductable, so paying down an 18% credit card balance is equivalent to investing in a tax free bond earning 18%! Who wouldn't want that investment!

[1monster]

3. The credit card companies, not content with having the goose that laid the golden eggs,

decided that they wanted the golden blood that ran through its veins and began bleeding it on a regular basis. Thereby weakening the same golden-egg-laying goose.

Which led to less golden eggs.

In order to make up the profit from the reduced golden egg crop, the credit card companies (read BANKS) began taking even more golden blood from the goose that laid golden eggs.

That poor goose is nigh on dead now, but the credit card companies are now havesting its feathers, bone and marrow.

Soon, there will be no golden goose parts left to exploit.

Poor credit card companies! (NOT)

Had they only been satisfied with the golden eggs the goose laid (and perhaps hatching an egg or two for more golden-egg-laying geese), they killed the goose that laid the golden egg.

No more golden eggs. As people pay off their credit cards, they will not get caught up in that credit bind again.

Any loan agreement whereby the loaner gets to change the terms, conditions of repayment, interest rates, and penalties at any time during the loan (and they never change in the borrower's favor) is a bad loan.

Credit cards used to be a decent deal. No longer. The golden goose (credit card holders) is a dying breed.

[ozone_man]

6. Excellent analogy,

This will add even more to the economic downward spiral that the debt bomb cause.

[bemildred]

7. Debt is servitude. nt

[MadMaddie]

8. You are absolutely correct.

I firmly believe that the Credit Bureausall 3 of them (which are on the stock market), has a stranglehold on 90% of all Americans.

I find it interesting that for any American that has perfect credit and buys a house or a car for example, their credit scores are lowered immensely once they make their purchase. At that point it takes years for the credit score to come back up. Our credit worthiness is determined by secret formulas by the the 3 credit companies. Why are the formula's secret when it impacts 90% of all Americans. (I say 90% because the rich really aren't impacted by credit scores).

This is an industry that should be investigated, I have a feeling that what will found won't make Americans happy.

[fascisthunter]

9. no more credit cards for me....

all paid and cut up