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New Steps to Achieve Healthy Credit Scores

By Sally Maison
Published: Friday, April 2nd, 2010

CULTRF-00015693-001The SmartMoney section of The Wall Street Journal explained in detail about the effect of the new regulations controlling credit card companies issued in February, 2010. The news published on March 16, 2010 pointed out the changes in the operations of the credit card companies under the new regulations and also the alterations in the rules related to consumers in maintaining good credit scores. 

The news item mentioned that consumers should continue to pay the credit card dues promptly without delays, maintain low balances in credit cards, and avoid the habit of keeping too many credit cards at the same time. Still, consumers should also take a few steps to improve and maintain healthy credit score under the new regulations, the news item revealed. Some of the steps advised by the news item in retaining healthy credit score are presented here. 

Have Sufficient Number of Credit Cards 

Until now, the advice of credit and finance experts to consumers was a serious warning against having too many credit cards, which could lead to large amounts of debts by utilizing multiple credit cards. However, the credit card issuing companies had drastically cut down the credit limits to many card holders. In this changed scenario, having very few credit cards could adversely affect the credit utilization, which forms about 30% of the credit score of an individual. At present, having 4 to 5 credit cards would be better than having only one or two cards. 

Utilize Certain Credit Cards to Maximum Limits 

Many credit card holders are not aware that several payment cards do not send credit limits to the national credit bureaus. The charge cards of American Express, Visa Signature, and MasterCard World do not report your credit utilization. The FICO scores computed by Equifax and TransUnion bypass these and other charge cards. As such, charge card spending by you would not affect your total utilization and your credit score for these two credit reporting bureaus. 

Avoid Requests for Lower APRs 

Previously, credit experts used to advice credit card holders to request for lower interest rates. In the present conditions, such a request leads to a review of your credit card account by the card issuing company. The card issuer might take a negative view of your handling the account and either increase the interest rate or cut down your credit limit. 

Do Not Close Cards with Low Utilization 

If you have only a $100 balance in a credit card with a limit of $10,000, this would be a big boost to your credit score. Paying off that balance and closing the card would remove that advantage and your credit score could dip because of the closure. Hence, it is advisable to keep credit cards with low balances and reduce the higher balances in other credit cards.

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