Bad Credit? Stop the Application
Thursday, February 5th, 2009There is a lot of turmoil in the credit card world right now that consumers are making simple mistakes that can now badly damage their credit. Besides not paying on time each month or missing payments entirely, credit card holders are also doing something that is negatively impacting their current credit scores.With many credit card companies rolling back credit card limits, consumers are seeking justice by finding a new card with higher limits without realizing the consequences of their actions.
Many think that applying for additional credit cards have no repercussions on their credit but what they fail to realize is that each time you submit to an application, either via mail or the internet, your credit score can drop up to 5 points. In these times of harsh recession woes, the last thing any consumer needs is a lower credit rating. But why the drop in points? Well, every time you apply for a new line of credit, you raise your credit usage ratio. If you have several credit cards, you are at risk for “overspending” on those limits and increase the chances that you will default on your financial obligations. Lenders do not want to see that.
Consumers who are unaware of these rules and still proceed to haphazardly apply for any credit card they think they might get their hands on, can potentially damage their credit score beyond immediate repair. This is will result in credit card applications being rejected and your credit score lowered even more in the process. It can be a vicious cycle, especially if you are already struggling to make ends meet.
So what can you do to stay on track?
First and foremost, for the credit card accounts you already have, you need to stop making new purchases if you can not pay the balance back in full each month. The closer you get to your maxed out limit, the more you are in jeopardy of having your line of credit slash involuntarily by the credit card issuer.
Secondly, you need to make sure that the payments you are making on your current credit cards are always on time. If you tend to make late payments or even miss making payments during any period of time, expect that your credit limits could be cut back and your interest rate will increase. These actions will make it even harder to get caught up. Your credit score will suffer as a result.
If you are unhappy with your current credit card company, contact them directly and ask what you an do about getting your original credit limit reinstated. Sometimes all you have to do is ask. If your loyalty and past performance with the credit company is generally solid, you might have a shot at getting what you want. The credit card companies want to keep you as a customer.
If you get no where with your current credit card company and want to pursue alternative options, take the time to find the right credit card for you. Not all cards offer the same rates and rewards. Find one that fits your needs and apply for it only after you have done all of the research. 
Don’t go crazy closing all of your credit card accounts. Just as applying for too many new accounts can hurt your credit score, closing too many accounts can have the same effect. Keep them active and balance free as much as possible.
By spending responsibly and not abusing your credit privileges or applying for too many new credit lines, your credit score can start repairing itself in a few months. Any points knocked off for new applications can be rebuilt by paying on time and in full, if possible.
April 13th, 2009 at 8:32 pm
Sometimes, I just don’t know what to think anymore.
June 6th, 2009 at 10:52 pm
Those were great guidelines given by you. Even I think, there are several reasons why good credit can go bad. Many people attempt to buy everything they need — and want — in one fell swoop, often leaving themselves with credit-card debt, car payments, home mortgages and other types of debt to pay off every month. Working according to your guidelines can prevent such situations.