The US economic crisis has thrown all the old money truths
out the window. The credit world has changed in ways that we
never expected. From credit cards to lending criteria to savings
rates, very few parts of the financial industry have been left
untouched. For the February newsletter, Credit.com is giving
you an update on the new rules:
1. Don't Count on Your Credit Cards
Credit card companies have started widespread campaigns to increase interest rates, lower credit limits, and sometimes even close the accounts of their established customers. These once stable financial products are now standing on rocky ground. And to make matters worse, account closures and credit limit reductions can both hurt your credit
scores.
What to Do:
Have multiple credit
card accounts
in case one is closed by the credit card company. Be prepared
for a situation where your minimum payment might increase.
If you've barely got your credit card debt under control,
now might be the time to get some professional
debt help. It's
the perfect time to take control of your debt.
2. The New Subprime
A credit score over 550 used to be enough to get you some kind of loan or credit card. And a rate above 650 translated into easy approval. Now, you need a credit score over 650 to even be considered for many credit products and a score over 750 to be on easy street. The era of easy credit is over.
What to Do:
Focus on having the best credit scores
possible. Start by checking all three of your
credit reports and scores online. Once you know where you stand,
use Credit.com's free Credit
Score Compass tool to estimate how making changes might help boost your
score. Reducing your credit card debt, paying bills on time, and avoiding
unnecessary credit applications are always good for your credit.
3. Stop Spending, Start Saving
Building savings is more important than ever in this rocky economy. You need larger cash downpayments to get good rates on mortgages and auto
loans. And in the event of a financial emergency such as a job
loss or illness, you can't rely on credit cards and home equity to be your financial safety net anymore.
What to Do:
In a perfect world, we'd all have enough money in an emergency
savings account to cover 6 months of expenses and a 20% downpayment
to buy a house. In this less-than-perfect economy, start
small. Even putting away just $50 a month can be a great
way to build your savings. Open a free high-yield
checking account online to make sure you're
getting the most back for your money.
How have you noticed the financial world changing during this
recession? Send your stories to our team of credit experts
at tidbits@credit.com.
Quote of the Month
"I cannot say whether things will get better if we change; what I can say is they must change if they are to get better."
-
Georg C. Lichtenberg
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