Are Credit Companies Giving Out Too Much Credit?

We recently added another credit card to our household.  We’re heading down to Florida for a family Spring Break.  Since we’re flying Southwest Airlines for the first time, we get a big bonus by opening up a Southwest linked card operated by Chase.  When I opened up the envelope and saw the details, I had a bit of sticker shock.  How?  They had given me a credit limit of $26,000!  It made me wonder if companies are offering too much credit.

Card Limits Have Been Jumping

My wife and I have great credit scores, both well north of 800.  As such, we’re not surprised when we get approved for high limits.  Still, the $26,000 limit was way higher than I’d ever seen.  Still, I started thinking about how the limits have been steadily increasing each time we’ve opened a new card.  These are just in the past couple of years.

  • Costco American Express.  Our first AmEx card was the Costco branded card that came out a few years ago.  This was the first time we’d gone considerably over $10,000 for a limit.
  • Costco Visa + Blue Everyday American Express.  When Costco switched our card to their new Visa branded card, the limit stayed the same.  American Express also wanted to keep our business, and offered us a great deal on a Blue Everyday card.  They matched the credit limit on our old card, meaning we now had double the limit between the two cards.

Impact Of Credit Limits On Our Credit Score

When we got the Southwest card, I became uncomfortable.  There’s no way in the world we need that much TOTAL credit, let alone all on one card.  I started thinking about requesting lower limits.  Then I started to consider whether this would have implications on our credit score.  I thought of this in regards to two variables:

  • Available Credit.  When your credit is pulled, I’ve heard that one of the factors used is your available credit.  If you have $100,000 available, another lender might be reluctant to give you more.  This would mean you could get denied for a loan or be charged a higher rate due to the perceived risk.  Obviously this hasn’t been the case so far for us given the new limit, but still something to consider.
  • Used Credit.  One benefit of having a big pool is that, as long as your usage is consistent, you’re using less of a percentage of your available credit.  So, let’s say you max out at $5,000 on your cards.  If you have $20,000 in available credit, you’re using 25% of your credit. But if you have $50,000 in available credit, you’re using only 10%.  It’s my understanding that using a high percentage of your available credit is actually a flag.

We Requested Two Credit Line Decreases

I ended up reducing the Southwest card and our American Express card by a total of $30,000.  We’ll never use this amount of credit.  Even with the lower amount, we’re still using a very small percentage of our credit.  So, I think it was the right move.

Two of our credit cards allow us free access to our FICO scores.  I keep track of it about every month.  I’ll be interested to see what might happen when the dust settles, to see if my score goes up or down or stays in the upper range that we’re used to.

Readers, have you noticed credit limits offered by credit card companies to be on the rise?  Have you ever requested a credit line decrease?  Let me know what you think of our moves and such in the comments below.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Small Things that Can Ruin Your Credit Score

You may have excellent credit now or wondering how to improve your score. There are many things you’ve heard of, such as bankruptcies ruining your credit or not paying your mortgage on time. However, there are other small and shocking things that can ruin your credit score.

Closing Your Retail and Gas Credit Cards

So you may think that if you close your retail and gas credit cards you’re doing yourself a favor. If they are closed, you can’t run the bill back up, right? Actually, this is a bad idea. You see, the information on your credit remains there for seven years – good and bad. Closing one reduces the length of your credit history; something lenders want to see longevity of. So keep these cards open, so it stays as a plus for you.

Not Using Your Credit Cards

Similar to closing your credit cards out, not using your credit cards could damage your credit. A credit card company could consider you as an inactive user. Then, they can close your account for you. The number of active accounts lowers on your report, and your credit utilization rate could increase since you now will have less credit available.

Credit cards are like installment loans when it comes to credit score.  They report monthly to all the major credit bureaus.  Tip; if you have poor credit you find smaller installment loans for bad credit.  These loans if paid on time can help increase your credit score over time.

Not Paying Parking Tickets

It’s not enough that you’ll end up with a boot on your car from not paying parking tickets. So if you think just by not driving your vehicle, you’re safe, one way or another, you’ll get hit hard to pay those fines. Your city could send those unpaid parking tickets over to a collection agency. And in doing so, it’s possible you could incur additional fees, garnishment, and dings against your credit report.

Not Paying Library Fines

Many libraries have similar rules. If you are over $50 or more in library fines, you’ll more than likely hear from a collection agency. This is a negative hit on your credit report. Moreover, this is one balance that can’t be negotiated.

Letting Your Storage Hit Auction

Do you have items in storage and decided you just do not want to be bothered with them any longer? While storage companies can auction off your items, this doesn’t mean they are willing to wipe the slate clean for you. So if you let your items get auctioned off, not only will all your items be gone, but you’ll have this collection record on your report for seven years. Your best bet – close out and sell the items off to not deal with this in the first place.

Not Finalizing Your Move-Out Utility Payments

If you’re moving, it’s wise to pay attention to any utility payments you may have. Not all utilities are transferable, especially if you move to a new city that has a different provider. Missing these payments not only counts as late payments to be turned over, but you may find that in connecting the next utility, you’ll have a security deposit fee.

The above six issues seem small, but letting just a few add up could have grave consequences against your credit report.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

7 Steps To Improve Your Credit Score

Few things are worse than finding out that you have a bad credit score.  Many people know that they have this hanging over their head, where others are taken completely by surprise when they go to take a loan or just do a check.

If you have a bad credit score, then don’t wait to start fixing it.  Every step you take can count and help improve your score, and the faster you get started, the faster you can see your score move in the right direction.

Check your credit report for accuracy.

The first thing you should do is check your credit report to make sure that everything is accurate.  A bad score can come about with inaccurate information or if you’ve been the victim of identity theft and there are items that you don’t even know are there.

Work through any late payments.

If you’re late on any payments, you need to get this taken care of in order to gain any sort of traction at all.

Reduce your available debt.

If you have a lot of credit lines open, you can often improve your score by selectively closing credit cards or calling credit companies and asking for a lower credit limit.  Less available credit is often seen as less risk of default, which can improve your score.

Reduce the number of open balances.

If you are carrying a lot of different credit cards with balances, you want to start reducing this number as fast as possible. If you owe $5,000, it’s more favorable to have two cards splitting that balance than it is to have six or seven.  You can start by paying off cards that have the lowest balances.  You may also look for an existing card that will offer a good rate on balance transfers and bring some or all of your credit balances together into one spot.

Pay off your loans faster.

If you’re only making the minimum payments, you need to start bumping this number up.  Sell some stuff.  Take on a side gig.  Make lifestyle changes.  Whatever it takes, you want to start lowering your balances, which will improve your score.

Stop applying for credit.

Newer lines of credit are seen as riskier than older ones.  Every ‘new’ credit card you take can potentially damage your score.  As a general rule, don’t apply for any additional credit.

Stop charging.

If you pay off $500 on your balances but then add $400 in the month, you’re not going to get very far at all.  Make your purchases for what you need today via cash, check or a debit card.  This way, any activity on your cards is only serving to lower it.  Knowing that goes a long way.

The bottom line is that bad credit scores are awful, but they don’t last forever.  You may not be able to change it overnight.  However, you can certainly do so with an organized and disciplined approach.

Readers, have you ever actively taken measures to improve your credit score? How did it go?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

The Credit Card of Tomorrow: Which Trends Will Change the Way You Pay

Though other countries have used EMV technology for nearly a decade, chips in credit cards are brand-new to the United States. To many Americans, it is unbelievable that such a small change mb-2016-01-creditcardcould have such a monumental effect on financial security, but the truth is EMV chips are leaps-and-bounds better than magnetic strips for fending off fraud. It certainly makes you wonder what other fantastic tech could make paying with credit faster, easier, and better than before.

Though it certainly seems like the future is now, most experts predict the humble credit card to undergo a number of changes in the coming years. Here’s a sneak peek at what tomorrow’s credit card might look like.

PINs, Not Signatures

Perhaps the easiest and most likely shift in credit card tech will be the adoption of personal identification numbers (PINs). Across Europe, chip-and-PIN cards have been the norm for about a decade, but American financial institutions only just started to integrate chips into credit cards last year. Unfortunately, instead of opting for identify authentication using a PIN, card companies selected signatures ― to the detriment of cardholders.

Signatures are not nearly secure as PINS; in the event you lose your card, a thief could easily scribble any name in the signature line without worry of the transaction being flagged. A PIN is harder to crack, adding an extra layer of protection to your credit. Knowledge of the superior safety of PINS is becoming widespread, and it is doubtless that Americans will be using PINS in a few years’ time.

Shifting CVV Codes

You might know the number on the front of your credit card forwards and backwards, but the short string of digits on the back of your card is just as important. This is called the card verification value (CVV), and it helps ensure you are in possession of your card when you make purchases. Thieves can easily skim credit card numbers, but CVV codes are harder to obtain ― and they could get even harder.

Some card providers are introducing cards with dynamic CVVs, which include algorithms that change the CVV with every use of the card. Only the tech within the card knows what new number will unlock the payments, which makes certain methods of stealing credit card information, particularly skimming, entirely ineffective.

Biometrics

Biometrics, or authentication through biological means, was the security buzzword of 2015. The possibility of unlocking tech with fingerprints or retina scans is thrillingly futuristic, and initial uses of biometrics in smartphones has caused quite a stir. Plus, biometrics seem inherently secure, as no one else on Earth has the same biology as you.

That’s precisely why some credit card companies are beginning to experiment with biometric tech. The most promising developments have come from a Norway-based company named Zwipe, which has built fingerprint scanners directly into their cards. Zwipe is fast-tracking its tech, and you might start seeing signature-less, PIN-less payments in the next few months.

Higher-Interest Rates

Not all forecasted credit card developments are enticing; the credit card of the future just might come with astoundingly high rates. Though the Federal Reserve has resisted increasing interest rates for more than seven years, in the final weeks of 2015, it has permitted a small rate hike of .25 percent. This small gain has convinced economists that rates will climb steadily higher in the coming years. Though smart credit users should be largely unaffected by the changes, elevated rates can be dangerous, and everyone who takes out loans in the coming years should be prepared.

Plastic Alternatives

Few people consider the materials that make up credit cards, but as the world goes green, the plastics used in your favorite plastic payments are becoming more and more problematic. More than 17 billion credit cards are produced every year, and the majority are produced from polyvinyl chloride (PVC), a variety of plastic that is immensely harmful to the environment. Not only does PVC release dioxins when incinerated, but it takes thousands of years for it to degrade in landfills, where most cards end up after their expiration.

A few credit card companies are already producing biodegradable credit cards that are eco-friendlier than most plastic payments, but because the cost of these cards can be 20 percent higher than traditional plastic, you might be waiting a bit longer for corn-based credit.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.