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Oct 28, 2009 -- Apply for new credit before your existing limits get cut
The slashing of credit card limits has been a hot topic here on the show. Recent news reports suggested that many travelers were caught unaware while on the road and had their credit cards shut down without any advance warning. This reportedly affected certain Citibank MasterCard accounts co-branded with select retailers.
According to FICO, some 70 percent of those who had their cards shut down had good credit standing. The San Francisco Chronicle reports that having one of your cards closed can result in a drop of more than 50 points in your credit score.
That's a very meaningful drop that can be the difference between getting credit and not getting it -- and the rate at which it is offered to you.
So what can you do to protect yourself and your score? Clark has been advising people that still have good credit to go out and get more lines of credit.
The cautious path here is to add another two major cards to your credit portfolio. One should be from a credit union, if possible. And be sure to use your "back of wallets" -- those cards you hardly ever use -- twice a year to keep them active in your credit mix.
Unfortunately, Clark won't be able to answer any questions submitted via commenting. If you have a question, please try posting it to our message boards.
Why would you have two credit cards and not use them? Atleast charge a little something and pay it off in full when the bill comes.
Why complain about not having a good credit rating? You didn't want your credit cards. Save up and pay cash for that car or house. Why would it be okay to finance a house or car, but not have a credit card?
Credit ratings abused, not bogus
The absence of information cannot lead you to conclusions. Without information about mortgages, car loans, student loans, and credit cards how can you tell if someone is credit-worthy? An unemployed homeless man with no credit is obviously higher risk than the newly employed recent college grad with no credit.
However, I am totally in agreement with you that credit ratings are being used, misused, and abused to the point of lunacy. I think you outlined some of those quite nicely.
I'm now going to go bang my head on a desk because of the crazy situation...
Bogus credit rating system
Why can't people maintain a great "credit rating" by not using ANY credit cards, never borrowing money from a lender, maintaining a healthy savings and checking account and always paying your bills on time? I put credit rating in quotations because I think it's a bogus term. I have done all of the above with the exception of having two credit cards for over 10 years. I decided to cancel them for good because I never used them, and the hit I took on my "credit rating" was much larger than Clark's estimate. I would have no problem with this bogus rating system if it wasn't also used for other purposes like obtaining employment, insurance rates and being approved for basic services, but the sad fact is your "credit rating" is more important than you. Now, after this economic disaster, people who have iffy credit who NEED, not WANT something, like a home, or a used car, are screwed because now the deck is stacked even higher against them. I guess all you anal folks that need that perfect rating better listen to Clark, what he says is the truth and the truth sucks.
Why complain about not having a good credit rating? You didn't want your credit cards. Save up and pay cash for that car or house. Why would it be okay to finance a house or car, but not have a credit card?