During this economic downturn, another side effect of the credit crunch is that your FICO scores could even go down 25-50 points without any negative information being added to your credit report! How is that possible? The reason is one of the contributing factors that the FICO algorithm calculates in generating your credit score is the debt to credit limit ratios you have.
With lenders, such as credit card companies, becoming more strict in their lending standards, many of them are already lowering the limits for huge numbers of their customers.
Their way of thinking is that even though nothing has changed with the customer's profile, the bad economy makes the customer a worse risk than they were in a good economy.
One of my close friends called me recently freaking out because he received a letter from American Express and his credit limit was reduced from $50,000 to ONLY $10,000! What's worse is his FICO scores are over 750! Not only is it extremely difficult to obtain credit during this economic crunch but even the consumers, like my friend, with the cream of the crop credit scores are feeling the pinch.
I also received several emails from people who have no idea why their scores went down only to find out that their limits were reduced which resulted in their debt to credit limit ratios to increase.
The result? Instead of having a 30% debt to credit limit ratio (DCL) they now have a 50% DCL.
This is what's happening to thousands of consumers across the country who's limits are being reduced.
If this all sounds pretty bad, well, it is.
But there are some things you can do about it.
First, check your mail.
By law credit card issuers must notify you of a change to your credit limit.
Second, keep your balances as low as possible because you never know if you'll get that lovely letter in the mail from your credit card company that you've had a steady relationship with for over 5 or more years with a perfect pay history only to have them reduce your limits for no reason and now your scores takes a 25 or 50 point hit! Third, continue to monitor your credit reports and scores on a regular basis.
Maintaining great credit is just like maintaining your car, managing your finances, and maintaining your health.
Of course we can't pay someone to maintain our health but we sure can pay someone to service our car, monitor our reports, and even repair our credit.
Credit repair may also be a good strategy to improve your FICO® scores anywhere from 25-100 points in a relatively short period of time when other factors are taken into consideration.
Keep in mind that there are 88 negative factors that contribute to your scores and only 6 factors that positively impact your score.
Of the 6 positive rating factors you personally have control of only 5! "Credit repair" is a general term usually used to describe a systematic process of rehabilitating an individual's creditworthiness, or financial reputation.
This strategy specifically addresses adverse items on a consumer's credit report that negatively impacts their credit scores.
In order for credit repair to have the most impact in raising your FICO® scores you have to take into account what other positive factors you have working for you.
For example, are there other positive trade lines actively reporting on your profile? What are your current debt to credit limit ratios on your cards? What is the length of positive history? Are there new recent tradelines that you just opened? Do you have excessive inquiries? When derogatory items are corrected or removed from your credit reports by the reporting agencies and you have other positive factors working for you you can easily expect a 25-50 point FICO® score boost.
Typically, credit repair can take several months before dramatic results occur but if the proper FICO® enhancement strategies are implemented you can even expect a score increase in as little as 45 days! Survive the credit crisis by achieving the highest scoring account.
The most important factor to remember is what is the highest scoring account.
Ideally you are looking for a Revolving Account that is: *5 Years Old or Older *Has a $5,000 limit or higher *Has a Debt to Credit Limit ratio balance of 30% Also, you want to shoot for the ideal blend that the FICO algorithm looks for.
Having 3 revolving credit card accounts with mainstream credit card issuers, an installment loan, and a mortgage loan.
When you stay ahead and be pro active with your credit you can survive the crisis.
With lenders, such as credit card companies, becoming more strict in their lending standards, many of them are already lowering the limits for huge numbers of their customers.
Their way of thinking is that even though nothing has changed with the customer's profile, the bad economy makes the customer a worse risk than they were in a good economy.
One of my close friends called me recently freaking out because he received a letter from American Express and his credit limit was reduced from $50,000 to ONLY $10,000! What's worse is his FICO scores are over 750! Not only is it extremely difficult to obtain credit during this economic crunch but even the consumers, like my friend, with the cream of the crop credit scores are feeling the pinch.
I also received several emails from people who have no idea why their scores went down only to find out that their limits were reduced which resulted in their debt to credit limit ratios to increase.
The result? Instead of having a 30% debt to credit limit ratio (DCL) they now have a 50% DCL.
This is what's happening to thousands of consumers across the country who's limits are being reduced.
If this all sounds pretty bad, well, it is.
But there are some things you can do about it.
First, check your mail.
By law credit card issuers must notify you of a change to your credit limit.
Second, keep your balances as low as possible because you never know if you'll get that lovely letter in the mail from your credit card company that you've had a steady relationship with for over 5 or more years with a perfect pay history only to have them reduce your limits for no reason and now your scores takes a 25 or 50 point hit! Third, continue to monitor your credit reports and scores on a regular basis.
Maintaining great credit is just like maintaining your car, managing your finances, and maintaining your health.
Of course we can't pay someone to maintain our health but we sure can pay someone to service our car, monitor our reports, and even repair our credit.
Credit repair may also be a good strategy to improve your FICO® scores anywhere from 25-100 points in a relatively short period of time when other factors are taken into consideration.
Keep in mind that there are 88 negative factors that contribute to your scores and only 6 factors that positively impact your score.
Of the 6 positive rating factors you personally have control of only 5! "Credit repair" is a general term usually used to describe a systematic process of rehabilitating an individual's creditworthiness, or financial reputation.
This strategy specifically addresses adverse items on a consumer's credit report that negatively impacts their credit scores.
In order for credit repair to have the most impact in raising your FICO® scores you have to take into account what other positive factors you have working for you.
For example, are there other positive trade lines actively reporting on your profile? What are your current debt to credit limit ratios on your cards? What is the length of positive history? Are there new recent tradelines that you just opened? Do you have excessive inquiries? When derogatory items are corrected or removed from your credit reports by the reporting agencies and you have other positive factors working for you you can easily expect a 25-50 point FICO® score boost.
Typically, credit repair can take several months before dramatic results occur but if the proper FICO® enhancement strategies are implemented you can even expect a score increase in as little as 45 days! Survive the credit crisis by achieving the highest scoring account.
The most important factor to remember is what is the highest scoring account.
Ideally you are looking for a Revolving Account that is: *5 Years Old or Older *Has a $5,000 limit or higher *Has a Debt to Credit Limit ratio balance of 30% Also, you want to shoot for the ideal blend that the FICO algorithm looks for.
Having 3 revolving credit card accounts with mainstream credit card issuers, an installment loan, and a mortgage loan.
When you stay ahead and be pro active with your credit you can survive the crisis.