December 30,2008
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Dormant Credit Card Concerns, Pt.3 –
– The FICO Future.We're definitely heading into a credit card drought and it could prove to be very foolish by not planning for it. So, let's take a closer look at the foreseeable horizon and already be moving in the right direction as the future unfolds. The greatest threat is probably liquidity. Liquidity is the means to get what you need when you need it. It could be bartering but most businesses today prefer cash, check or a credit card. Cash and checks based on having the cash are going to be a real problem during the drought. So, during the interim, many will only have the temporary option of using credit cards to bridge the gap until the drought subsides a little. We're only heading into ‘hard desert' now and many people don't even know how to prepare. So this next facet called planning may be the most important one.
Planning: Where credit cards are concerned, we do have a few rules and guidelines. Most of them are tied to having a good FICO Score. Fair Isaac Co. guidelines are our nations standard in determining credit card risk and the range goes between 300 and 850. Basically, it's all about getting a good FICO Score. A good score used to be around 620 but that has recently shifted up to about 720.
So, when considering ‘dormant' cards going away, an important consideration is "How will this affect our FICO Scores?" If you only have one card and the account is closed, the problem is obvious. It's generally good to have somewhere between two and five credit cards. That way if one goes south, you can fall back on the others. As far as the FICO Score, certain areas have more effect than others. The area that counts the most (35%) is payment history.