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Banks Offer Chance to Rebuild Credit

By Sally Maison
Published: Monday, October 5th, 2009

Consumers now have more opportunities to rebuild credit score as banks offer better credit and debit card deals. Finance analysts say that new consumer-friendly offerings will give consumers a chance to improve their creditworthiness.

Banks Offer Chance to Rebuild CreditAs a reaction to the new credit card law, banks and other lending companies started raising transfer fees and charges in order to pre-empt income losses in the future. Credit limits were also cut to keep consumers from making purchases that they may not be able to pay. The percentage of banks which charge annual fees also rose to 20% which is a huge addition to the payment load of consumers. Critics then criticized Washington for overlooking the new law’s implications.

However, the strongest reactions were from consumers themselves. With poorer ratings from credit reporting agencies (CRAs) and higher fees from banks, many Americans find themselves amidst what they initially perceived as a debt quagmire. Needing to build better scores to improve their financial life, consumers raised their grievances individually through social networking sites.

As predicted by finance analysts, these outcries were met with positively overwhelming responses. Consumers began expressing their grievances vehemently which place great pressures on lenders. As a result, banks finally yielded and consumers can now rebuild their credit scores through new card deals.

As this month starts, major banks such as JPMorgan & Chase Co, Wells & Fargo, and Bank of America Corporation opened new credit deals that have lower overdraft fees and interest charges. Bank of America recently released a credit card plan which limits fees and interest rates. Meanwhile, Chase is allowing consumers to pay off grocery, gasoline, and other charges without incurring additional charges.

Some analysts pointed out that the new law also plays a role in more lenient lending deals. They noted that new regulations, along with angry clients, made bank executives feel that there is not much they can do about the situation.

Specialists say that by acquiring new card deals and paying off their balances, consumers can boost their scores within a span of few weeks. They commented that the ability to owe money and paying it promptly impresses lenders, which can save a consumer hundreds in interest fees.

Credit experts warn consumers though not to jump into new deals right away. They advise consumers to check their credit limit and income before acquiring more debts since debt-to-credit ratio makes up 30 percent of a person’s FICO score, which is the most widely used scoring system in the United States. Market experts say that 80 percent of the largest finance institutions and 75 percent of mortgage lenders use Fair Isaac’s rating to they tell consumers to be more mindful of their credit score.

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