Is Credit Score 500 on the Credit Score Scale Trouble in Today’s Credit Environment
The current credit crisis is having a serious impact on consumer access to liquidity. Many lenders are running scared, and to minimize their exposure are cutting down accounts left and right.
If like so many others you thought that having available credit on a few cards was emergency money, you may be in for a bitter surprise once you decide time has come to call on that insurance. It has become a vicious circle: Banks and credit issuers are looking at those clients with bad credit score, and changing the term of their contracts.
Since your interest rate is supposed to be a function of the credit risk, and since overall risk in this market is being perceived at best as acute, many people are seeing their rates jacked up without warning. So with the same payment you have always made, less go to equity, more to interests, and your balance inflates. That is, if there is a balance or a rate to be increased: Many others are seeing inactive credit card accounts canceled altogether. Or the available credit playing follow-me with the loan, margin or card balance.
Of course, with available credit and account cancellation being key factors in the calculation of your credit score, all this erodes your points. Your credit score goes from OK, to bad, to worse. And other lenders now start looking at you as well, and increasing your rate, and canceling or lowering your limit… Usually, just in time to match the pink slip you or your spouse got in the mail. Not only that but credit length – how long your oldest, active accounts have been opened – also plays an important role in calculating your credit rating.
If those are the accounts that get closed down, the drop in credit score and FICO could be significant. If you score is currently in the top tier, say 700 and better, you should be sheltered from this round robin of financial misery.
However anyone the lower end of the spectrum has to take action and protect whatever they have, improve it if they can to avoid being the first accounts being reviewed. It is no longer the matter of paying a few more points in interest, it is about your whole access to credit. Since it has become increasingly difficult to do anything – book a hotel room, or even just rent a video – without a credit card, you should definitely feel concerned.
Mike writes about the credit score scale . If you want to know if a credit score 500 is trouble and how to improve it quickly then visit his website.
Article Source: ArticleSpan
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