For years, consumers have heard, “Keep your credit scores up and you’ll always be able to take advantage of credit card offers“. These days, however, credit card companies are looking at much more than one’s credit rating. Few have made it through the past thirty-six months without their overall credit scores taking a hit. Blame it on the tough economic times, but the bottom line is you’re more likely to receive a polite decline today than you would have two years ago.
Look at the Past
For quite some time, credit card companies have begun looking at their customers’ changing habits. It’s not uncommon for credit lines to be reduced or interest rates raised. Often, it’s not because a customer has skipped a payment or even paid a few days late, but rather, he may have taken a job that pays less than what he earned when the new credit card was issued. He may not even realize these adjustments are made until he receives his monthly statement. These unexpected and unannounced changes are enough to throw anyone’s budget into a tailspin.
You Have Enough Available Credit
These “thanks, but no thanks” mindsets can sometimes come after a company looks at your available credit and determines you already have enough at your disposal. They may see a new application as a means for consumers to take cash advances, which have traditionally signaled financial problems.
With so many bankruptcies these days, these companies simply aren’t willing to take these chances that they never would have rejected in the past. Let’s face it, the continued record breaking foreclosures are enough to keep the financial sector as a whole concerned. If a family struggles to the point of losing their home, they have stopped making credit card payments long ago. Despite assurances in the news every day, these same problems continue to plague Americans.
There’s more. Using a complicated formula, likely as confusing as the one used to determine a credit rating, financial institutions are now taking into consideration what’s referred to as a “behavior score”. This is determined by your overall habits, including whether you historically pay balances in full at the end of the month of if you tend to let those balances ride for several months.
Your debt to ratio, or DTI, has always been a consideration too; now, if you’ve also maxed out your credit lines and credit cards at any time, that too is going to factor into the behavior score. Ever gone over the limit? That can significantly change the outcome of your latest credit card application, especially if it’s with a company you’ve already established a payment history with. The problem, at least for consumers, is there’s no way to definitely determine what that behavior score is. Each bank arrives at its own conclusions using its own formulas. It’s not something you’ll find on your credit report, either.
Finally, there now exists a bankruptcy score. While you might never have filed for chapter 7 or 13 protection, if your credit history suggests it might be possible in the future, you can be sure that’s going to weigh heavily in the decision making process. Again, those same checklists are usually incorporated. Late payments, how close to the edge you live in terms of maxing your current credit cards and whether or not you’ve ever gone over a credit limit will all be thrown into the algorithm.
This is simply the new way of doing financial business in a risky economy. Until those winds of change begin to shift, it looks as though these tough considerations will remain firmly in place. That said, if you’re wondering how to cover those proverbial bases, the same rules apply. Pay more than the minimum amount, stay well within your credit lines and avoid missing payments or late payments.
As always, the consumer has the right to question any changes made to his account and of course, that’s always encouraged. Even if the bank or issuing company won’t reverse its decision, a consumer can still go on record as having disputed the changes being made at all.