According to a recent report in the Seattle Times, approximately 45% of US banks reduced credit limits during the 4th quarter of 2008. The article also highlighted the case of a 58 year old construction company owner in San Diego who saw his credit score drop from 760 to 650 as a result of the changes.

If you’re faced with a similar situation, you should pay down your balance as quickly as possible. You might also consider a balance transfer to a card from a different issuer. If you play your cards right (no pun intended), you might even be able to reduce your interest rate.

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• myFICOis8 – 30% discount!
• CPPSAVINGS – 20% discount!

As always, they also offer a free 30 day trial on their ScoreWatch service, which gives you free access to your credit reports as well as your real FICO score.

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Setting up an account was very simple, though they do ask for some fairly sensitive information including your SSN. This makes sense, as they need to access your TransUnion credit record in order to estimate your score. Since it’s free, they don’t ask for any sort of payment information, and you don’t have to remember to cancel anything.

In terms of accuracy, they seem to do pretty well. In fact, my “official” FICO score is just short of 800 and Credit Karma had me pegged at 777. Another advantage of their service is that they track your score over time and provide you with a graph of the resulting data.

If you’d rather get a “real” FICO score then, like I said above, you should check out the free ScoreWatch trial from MyFICO. But if a reasonably accurate estimate will suffice, then Credit Karma is a great alternative.

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• Pay your bills on time
• If you missed a payment, get current and stay current
• Be aware that paying off a collection account or closing an account on which you previously missed a payment, will not remove it from your credit report
• If you are having difficulty making payments, contact your creditor or see a credit counselor
• Keep balances low on credit cards and other “revolving credit”
• Pay off debt rather than moving it around
• Don’t close unused credit cards as a short term strategy
• Avoid credit repair agencies that charge a fee to improve your credit score by removing negative, but accurate information from your credit report
• If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly

Like I said, pretty standard stuff, but a good reminder just the same. If you’re not sure where you stand, remember that you can get a free credit score from MyFICO.

Source: ABC15.com

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For their part, Experian plans to continue selling their own proprietary credit scores to directly to lenders. In other words, lenders will be able to check your Experian score, but you won’t be able to check it yourself. The timing for this is especially bad, in that creditors are raising their standards, and small scoring differences can make a big difference for borrowers.

“We are surprised that Experian made such a decision, particularly given what’s going on in the national economy and with consumers being concerned about their credit standing,” said Tom Quinn, vice president for scoring at Fair Isaac. “Their decision means that consumers will no longer be able to see or manage their scores based on the Experian data.”

If you’re interested in checking your Experian-based FICO score, your only real option is to buy it in the next week or so. One possibility would be to sign up for myFICO Credit Complete, which gives you all three credit scores, but also costs close to $50. Alternatively, if you just want to check in on things and are okay with receiving a single score, you can sign up for the free trial of ScoreWatch, which will give you free access to your Equifax score for 30 days. Just don’t forget to cancel.

Source: NY Times

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» Fistfuls of Credit Cards: How Many Is Too Many?
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» “Credit Crisis” Sale at myFico.com

Here’s a list of some of the more popular myFICO packages:

• FICO Credit Complete – $47.85 $23.91 – 50% discount
• FICO Score Watch – $89.95 $44.95 – 50% discount
• FICO Quarterly Monitoring – $49.95 $24.97 – 50% discount
• Suze Orman’s FICO Kit – $49.95 $24.97 – 50% discount

Remember, offer ends on 1/22/09, so don’t drag your feet.

Via: StopBuyingCrap.com

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While this accords well with the widespread reports of reduced credit limits that we’ve seen, I know for a fact that there have been some selective increases. After all, American Express recently increased out credit limit by roughly 25%.

As for credit scores, nearly 52% of banks reported that they’ve increased the credit score required to secure a line of credit, whereas just under 49% have reported no changes. Nor surprisingly, none of the banks surveyed said that they were making it easier to get credit. This is just one more reason why you should be working to improve your credit score.

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As always, Fair Isaac is keeping details of their algorithm secret, though it’s known that they’ll be increasing the number groups into which borrower are classified from 10 to 12, allowing them to better account for the number and magnitude of credit problems that people have. This will allow them to better distinguish between people with infrequent credit problems and habitual offenders. The new model will also focus less on the number of accounts that someone has and more on the amounts that they owe.

Another interesting point is that it will be possible to establish credit by “piggybacking” (i.e., being an authorized user on someone else’s account). That being said, Fair Isaac intends to make that process “harder and lengthier.”

Source: Kiplinger.com

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» Seven Ways to Raise Your FICO Credit Score
» FICO Credit Score Changes Looming
» How to Score a Free Credit Score

Why should you care?

Because hard credit checks can reduce your credit score. Admittedly, it’s a small effect, so those with stellar credit don’t have a lot to worry about. But if you have borderline credit, these sorts of things can be enough to make move you down into undesirable territory.

How can you protect yourself

The simplest way to protect your credit score is to ask the bank whether or not they’re going to run a credit check. Of course, if you really want/need the account, there’s not much you can do about it, but you’ll at least be making an informed decision.

If you’re familiar with any banks that do a hard credit check during the account opening process, please leave a comment below. I’ll start… I have it on good authority that ING Direct does this with their ING Electric Orange checking account, presumably because they offer an overdraft line of credit.

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Credit Card Issuers Reducing Limits

As I noted previously, card issuers have started reducing their customers’ limits as credit has become tighter. Here’s how to protect yourself:

• Keep a close eye on your mail for any notifications of a change in your limit.
• Login and check your account regularly. While issuers are supposed to provide you with prior notice of any changes, you can never be too careful.
• Save room under your limits for true emergencies. Better yet, build up an emergency fund so you don’t have to rely on credit in a pinch.

Credit Card Issuers Increasing Rates

As credit has dried up, issuers have also started charging more for it. Here’s what you can do to avoid overpaying:

• Keep a close eye on your mail for any notifications of rate changes.
• Pay down your balances, preferentially targeting the balance with the highest interest rate first.
• Move your balances to a lower rate card — ideally one with a 0% balance transfer offer.

Credit Card Issuers Tightening Standards

Given all of the recent problems with people failing to make good on their debt obligations, credit card issuers have also tightened their approval standards. Here’s what you can do to make sure you’re in a good position to get credit when you need it:

• First and foremost, stay current on all of your payments.
• Keep a close eye on your credit report.
• Dispute any inaccuracies to get them removed from your record.
• Do whatever else you can to improve your credit score.

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