CREDIT SCORES

If your credit limit was cut recently by your credit card company, then you may be spinning your wheels to figure out what happened. But the truth is, there are a number of reasons that this can happen – and believe it or not, it may not always be your fault.

So if you find that your credit limit was cut by your credit card company, take a moment to explore some of the reasons that this may have occurred:

• Irresponsible financial behaviors. Okay, this is definitely your fault – unless you’ve been the victim of identity theft. If you’ve spent time running in and out of stores charging everything in sight to your credit card and didn’t pay your bill on time, it won’t take long for you to be deemed financially irresponsible – and have your limit reduced.
• The suffering economy. In the wake of banks closing left and right, you may find that your credit limit was cut simply because there was no money available to back it up if charged. Some banks also feel that because people are losing their jobs, they won’t be able to pay off their balance, and thus are lowering the balance to play it safe.
• Youmight be catching the blame for others’ mishaps. In recent years, some credit card customers have found that their credit limit was cut without them having done anything wrong. What’s happening is that some companies look at something called “behavioral scoring” to decide whether the people who shop in the same places as their customers have bad financial behavior. If they do, you as a customer may catch the blame by having your limit reduced.

Many have wondered whether credit scores and a high credit limit are related, and are surprised to learn that they are. But how do they work in conjunction and affect one another?

Here are a few ways:

• The credit utilization ratio. This ratio basically looks at the balance of your available credit with the amount of debt you have to determine 30% of your FICO score. In short, if you have a high credit limit, then your credit utilization ratio will lower, which raises your FICO score. So if you’re looking for a higher FICO score, asking for your limit to be raised a good route to take.




• The credit inquiry. On the other hand, if you apply for credit often in hopes of raising your credit score, you may be disappointed to learn that with each application comes a new inquiry, and with each inquiry comes a lowering of your score temporarily. To avoid your inquiries causing this problem, you can make all of your inquiries within the same 14-day period. If you do this, they will be grouped together and counted as one inquiry.
• Irresponsible behavior. Another way that credit scores can be affected is through your irresponsible financial behavior. If you make charges without paying off your balances, you are likely to have your high credit limit reduced in a hurry. Of course, if this happens, you will see your FICO score reduce for two reasons – past-due accounts and your credit utilization ratio raising.

Credit card companies and a new financial profiling tactic called behavioral scoring may lower your credit line – and eventually, your credit score – as a result of the financial actions of others. A recent report states that companies have always judged you by your own financial actions, but now, in addition to stricter guidelines, the credit mistakes of others might have negative affects on your credit.

Determining the loan amount you can afford comes down to a number of different variables. Not everyone should request the same amount of money because everyone has different incomes, down payment amounts, and credit scores. Because there is so much to consider when deciding how much you can afford, it’s good to look over your personal situation before making your first move.

ConsiderYour Down Payment

Before applying for an auto loan, it’s a good idea to consider a credit check – but where do you start? The process is actually very simple, and can save you tons of money in the long run. So before you go to purchase a new or used vehicle, take time to learn about how you can check your credit report and FICO score.

Conducting a Credit Check

Ones’ past will always come back to haunt them, especially when applying for loans of any type. Regardless if it was a couple of late payments on a credit card, a default and subsequent renegotiation on a student loan, or a poor credit utilization ratio – your credit score can be marred with those types of errors, and can make it difficult to qualify for personal loans at a time of need. Personal loans are great tools for consumers to finance unexpected expenses like car repairs or large tax bills, but without a decent credit history, finding one may seem like a fruitless search for the Holy Grail.

This may feel so because personal loans are different from other types of loans, such as mortgages and car loans. Personal loans are riskier for the lenders as they are unsecured. Unsecured loans mean that borrowers aren’t offering up collateral to get the loan. The loans are provided by lenders on good faith, so those with a less than stellar credit history may struggle to secure one.

Acquiring auto loans has evolved into a relatively simple process with the advent of online applications. Once upon a time, financing a vehicle meant sitting at a car dealership, possibly for hours, hoping that once the process is complete, you have been approved. But now, sitting behind a computer for just a few minutes can get the job done. To see just how simple it is, let’s look at the typical process of applying for a loan over the internet.

Starting the Process

The process of credit scoring that we use today was first developed in the 1950′s, over the years this process has increased tremendously since the early 1980′s. Using statistical models to assess an individual’s credit worthiness, the three major credit bureaus – Experian, Equifax, and Transunion – calculate your credit score based on your credit history and your performance in paying off your current credit accounts.

The credit bureaus compile information that is provided to them by your creditors, and use that information to calculate your credit score. Working with a company called Fair Isaac, the credit bureaus developed a scoring model in the 1980′s that allowed each bureau to offer its own credit score, based entirely on the content of that credit bureau’s data.


Each of the three major credit bureaus uses its own unique system for compiling data and calculating scores. However, scoring models are relatively normalized, to the extent that your credit score at one bureau will be roughly equivalent to your score at another. For example, if you receive a score of 680 from Experian, you can expect a score somewhere in the same range from the other two bureaus, even though the calculations used to arrive at that score are different.

Your credit report includes all of the detailed information that your credit score is based on. Any bank accounts, credit card accounts, utility accounts, mortgages, student loans, line of credits, or installment loans which have been taken out in your name may appear on your credit report; as well as, any outstanding monetary judgments, tax-leans, or bankruptcy filings. It’s important that this information be accurate since it’s the information that your credit score is based on. But what happens when there are mistakes in your credit report?

It’s not unheard of for anyone to find errors in their credit report for a variety of reasons. Identity theft or plain misinformation can attribute any number of errors to your credit history. If that happens to you, you are allowed to dispute any inaccurate information with the credit bureau and get it removed from your credit report. Under law, both the credit bureau and the information provider are responsible for correcting any inaccurate information. They also must investigate any disputes within 30 days and notify you of a resolution.

If your credit is less than stellar, you probably already know that you will have a difficult time getting the best interest rates on a mortgage refinance. Here are a few things you should know about applying for bad credit mortgage refinancing.

First, your interest rates will typically be much higher than a person with a credit score of 680 or above. However, you should shop around and see what is available to you; depending on the current interest rate, you might be able to find some type of financing with a better rate than what you currently have. Investigate several lenders for the best rate. If you are a member of a credit union or can qualify to become one, be sure to check their rates because they tend to have better options for people looking for bad credit refinancing.