September 2, 2009
-
News: Confusion Over Credit Scores
Are you confused by all the hype over what's happening in the credit card industry? If so, you're not alone. A large number of Americans have been watching with great anticipation how the financial industry will react to the new credit card reform bill. The first provisions went into effect last month; however, some of the most significant ones will be implemented in February. There appears to be a growing number of companies taking advantage of Americans concerns on how the new laws will affect their credit scores. One of the most asked pertains to the latest wave of lenders shutting down credit card accounts without no provocation or negative activity. Rumor has it that when this occurs, it has a negative effect on an individual's credit score. Unfortunately, this is a real threat.
Why would shutting down a credit card account that has not experienced any negative payment history reflect negatively on your credit history? An individual's credit history is derived from several things. Debt ratio plays a major role. When an account is shut down, the available credit no longer exists and thus increasing debt ratio. However, credit card customers should not panic. If they have been paying on time and have managed all their other debt responsibly, the shutting down of one account will not have a significant difference. More importantly, Americans should remain committed to paying their payments on time; such a habit will be a more valuable payback.
Several companies, including some that are associated with and approved by credit card companies, have been soliciting Americans with a plan that monitors the individual's credit scores for a small monthly fee. The simple truth is that Americans don't need their credit score to monitor activity. All the significant information that affects your credit score is included in your credit history report. A wise decision would be take the $5 or $6 a month and apply it in reducing your card balance. It will save you interest and help to reduce debt faster.