Saturday, June 28, 2008

Credit-card lenders lower borrowing levels, which hurts consumers' credit scores

By Rachel Beck, AP Business Writer

NEW YORK (AP) -- Just as Americans grow more reliant on credit cards to help pay monthly bills, they're being hit with a one-two punch: Card companies are reducing borrowing limits for tens of thousands of consumers, which then can lead to lower credit scores.

Those facing this predicament might not even know it until they apply for a loan or another credit card, and then get denied because their credit score has dropped.

This is an unintended consequence of the financial world's widespread ratcheting down of risk. Banks and other card lenders are trying to better protect themselves from more massive losses like those they've seen from subprime mortgages.

As a result, they are looking for ways to reduce their exposure to cardholders more likely to default. That's why they are lowering credit limits, which means they are reducing the maximum amount of credit extended to an individual, along with boosting card interest rates and allowing fewer balance transfers.

Continued . . .

1 comment:

aka BNR said...

I posted this article as I feel that it is really important to keep up and be aware of what's going on in financial news. It is amazing how many changes occur without consumers knowing about it, that is until it's too late.