Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected
Credit Score News, Tips & Advice « Credit Scores > Credit Score News > Credit Card Companies React, Scores Will Drop

Credit Card Companies React, Scores Will Drop

By Sally Maison
Published: Sunday, September 6th, 2009

Credit scores will start dropping as the year ends, experts say. This is a result of changes made by credit card companies as a reaction to the new credit regulations being implemented. Last week, the first phase of laws took effect. The consequence: many consumers experienced cutoffs in their credit limits and an increase in their interest rates. Even those who have outstanding scores or records took a hit. However, people who have bad credit scores will take the worst hit in an effort of credit companies to maintain profit.

Credit Card Companies React, Scores Will DropThis new financial law initially took effect last May 20. Among these are the increases in interest rate notification period and an option to decline interest rate increase. With major provisions yet to take into effect, credit card companies are starting to guard themselves against profit losses. Their solution: reducing “consumer-friendly” offers.

Consumers are now seeing a decline in the number of reward credit cards. Moreover, 0% rates are becoming scarcer and its terms are beginning to get shorter. The heyday of 13-month 0% rates is over while a 6-month period is becoming the trend. Credit experts predict that card issuers will make more maneuvers to maintain profit as they prepare for the implementation of more regulations.

Starting February next year, card companies can no longer increase a client’s interest if he is not more than 60 days late. Another provision that is yet to take effect is the banning of credit card marketing to consumers below 21 years old. These two provisions alone mean huge profit losses to card companies. Experts say that card issuers will do everything to find loopholes in the law so they can keep the money flowing. One concern for financial experts is the possibility that this increase in notification period will not necessarily stop rate increases. Instead, lenders will most likely keep raising interest since they are allowed to do so as long as they inform consumers. Credit specialists add that banks will raise interest in the coming months before stricter limits on interest raise take effect in 2010.

Experts say that consumers should start working on their scores now so credit companies will have fewer excuses in raising their interest rates. It is ideal for consumers to keep their score above 700 so their scores will not suffer much should there be a decrease in their credit limits and other changes in their credit card deals. Financial specialists conclude that now is the best time for consumers to improve their credit scores.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.