| Credit is a necessity in today’s fast paced world. Consumers use credit for home improvement projects, financing expensive ticket items, and everyday purchases. Unfortunately as a result of our declining economy and job losses our debt level has also increased. As a result numerous banks have began cutting and lowering credit lines for many Americans.
Consumers are being targeted by demographic location, income level, even with the best of credit scores. There has also been speculation on what formula credit card companies are using to rate your spending habits and where you shop. Because of growing recession banks are attempting to minimize their losses by utilizing this formula.
Take California for example, which has one of the highest foreclosures rates in the country. Living in this foreclosure zone could result in a decrease of your credit line. Toward the end of 2008 many angry American Express customers posted complaints stating that their credit lines had been cut for no reason. We are not talking about accounts that were in default but good customers who had paid their bills on time and maintained a spotless record. Even small business found that their credit limits were decreased without fair warning or reason. Take Kevin Johnson for example who received a letter from American Express indicating that they decreased his line of credit because he shopped at Wal-Mart.
http://www.nytimes.com/2009/01/31/your-money/credit-and-debit-cards/31money.html?n=Top/News/Business/Companies/American%20Express%20Company
The fact is that in your card holder agreement banks do have the legal right to decrease your credit line for any reason they deem necessary. It is unfortunate however they are rating consumers credit based on their purchases not individual payment history. You may be thinking, “What’s the big deal?” When ever there is a change in the allocations to your debt ratio it can make a huge impact to your fico score. Let's do the math. If a credit line of $25,000 suddenly decreased to $500.00 this would negatively impact your ratio of debt to credit on your official credit report. As a result your score would decrease significantly. The general rule of thumb is to keep your revolving balances within 10% of your overall credit line.
Stay on top of your finances by using a few simple guidelines:
Pay attention to the content in your credit report by subscribing to a credit monitoring service.
Use the following leak to get some in sight into choosing the right service depending on your individual needs.
http://www.consumercompare.org/credit_report_monitoring/compare.php?kw=cc2+gcrmb2+credit%20monitoring%20services&gclid=CJvg7dr6nJoCFQVxFQodPX9b9A
Watch out for existing changes in your card holder agreement with your bank; Congress has passed a new law which will take affect this summer prohibiting credit card companies from raising your interest rates on existing balances. Eliminate high interest cards with high fees. Take concern with recent rate increases. If you are capable of paying off the full balance on a card before the end of the statements closing you can always avoid the interest charge.
Spiritual thought for today...
We should act responsibly with our personal finances as it says in the scriptures. Romans 13:8 says, “Owe no man nothing…” (KJV). "The rich rules over the poor and the borrower is servant to the lender" (Proverbs 22:7 KJV). Using credit in today's time is a necessity however God wants us to be good stewards and to use wisdom in everything we do. |
