Have You Checked Your FICO Score Lately?

The last economic slowdown hit in 2000. The difference is this time the banks are already reeling from mortgage defaults. The “easy money” era has caught up with us and them. The banks irresponsibly gave out multiple credit cards to anyone, regardless of income. The consumers took them up on the offers. The “things will keep getting better attitude” has caught up with us and done many people in.

Why Your FICO Score Might Fall If You Have Credit Card Balances

The credit card companies are trying to protect themselves from defaults, so they are cutting credit limits. Amounts owed makes up 30% of your FICO score, and the amount owed is compared to your limit. Depending on your balance and how far your limit is cut, your credit card could go from a 50% ratio to maxed out.

Even if you have a great credit history of paying your bills and paying them on time, the company can cut your limit. The good news is that the amount due vs. the credit limit is looked at as a total, not by individual card.

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What To Do To Secure Your Financial Future

If you want to secure your financial future, you must take action. If your finances aren’t what you want them to be, and you don’t do anything different, how do you expect them to improve?

Suze Orman says, “There is to be no curling up in a fetal position on the couch in 2009 hoping that when you emerge the crisis will have passed. No assuming that there is a government bailout or Wall Street rally right around the corner that will fix everything for you without any effort on your part. You will have to get off the couch and take control of your financial life in 2009.”

Suze has published a free downloadable book to give you an action plan for 2009. You can download it here. If you prefer a printed copy since this is a 227 page book, go to this link Suze Orman’s 2009 Action Plan.

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Protect the Credit You Have

Be proactive rather than reactive with your credit card accounts when you are facing hardships. Don’t wait until the credit card company jacks up your rates and you can no longer pay your bills. Call them and negotiate before you are late with your bill, or broke. The better your credit is, the more negotiable the credit card companies are. If a health crisis arises or you are laid off, call your creditors, explain the situation to them and work out a plan with them. Ask what your options are.

Here are some things that I have successfully negotiated with credit card companies.

1. Your due date can be changed. They won’t change it for the current bill, but it can be changed for future bills. This is helpful if you change jobs and will be getting paid at a different time during the month, or you have too many bills due at the same time of the month.
2. Request a lower interest rate.
   • If you have an offer to transfer your balance to a new credit card, it would be better to call up your current company and negotiate with them. Tell them about the offer you have and let them make you a counter offer, rather than have new credit cards or balance transfers on your credit report. Besides, there are usually fees if you transfer a balance.
   • If you always pay your bills on time and you are late on one, request that they set your interest rate back to the rate you were at before your payment was late. They may give you the benefit of the doubt at least once. Don’t abuse this because they will make a note of it in your record.
3. If you go over your limit, make a payment that will bring the card back below the limit, then ask the company to remove the over-the-limit fee.

Above all else, remember that attitude counts for a lot. If you want people to work with you, you must be willing to work with them.

New Credit Card Billing Rules

The bill for the new credit card rules has been approved, but the rules do not take effect until July 1, 2010. The rules sound good to me, but there are some who say it will make matters worse. They say the banks will try to make the money they will lose in other ways. But it makes more sense to me that by that time the banks would extend less credit to those who would be a high risk. See what you think by reading the following.

The new rules include five key protections for consumers who use credit cards.

1. Banks would be prohibited from increasing the rate on a pre-existing credit card balance, and must allow the consumer to pay off that balance over a reasonable period of time. The consumer would be given 45 days notice before a rate increase. The increase will typically apply to future purchases rather than current balances. However, the rate can be increased if
   • it is a variable rate and the rate index changes
   • a promotional rate expires
   • the minimum payment is not received within 30 days of the due date

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