The Credit ProBusiness Credit Scores are Important TooWith the promulgation of companies like “Free Credit Report.com” and the like, Americans are more aware than ever about the importance of your credit score. However, the same holds true for businesses. As the ECommerce Journal notes your Business credit Score is valuable tool for business development. Credit Limit CrunchIn excess of 30 million cardholders had their credit limit reduced last year, a new study reports. Incredibly, about 22 million card holders, or 11% of American consumers, saw their credit limits lowered despite having no recent dicey behavior or actions such as negative public records added to their credit reports, according to Fair Isaac Corp.
The median FICO score for this group was 768 in April but then rose to 770 by October. Lenders reduced this group’s credit limits by an average of $2,200, a relatively small percentage of the $44,000 available during the six-month time frame. Most of these borrowers had inactive or low-balance card accounts and generally had few missed payments and a long credit history. Of all U.S. consumers, 80% had no “risk trigger” posted to their credit reports during the study period. Just 5% of consumers, or 10 million cardholders, had limits dropped because of shaky credit activity. According to Fair Isaac, consumers who use a large percentage of available credit are much more likely to default on a credit obligation. Since credit card issuers began scaling back credit availability in early 2008, 16% of Americans have been affected, Fair Isaac said. Credit Score Bar RaisedThe ability for a barrower to get a loan is getting harder, according to the president Accunet Mortgage in Bulter, Wisconsin.
Brian Wickert, president of Accunet Mortgage said ”Two years ago, it only mattered if your credit score was above or below 620,” he said. “Eighteen months ago, top tier credit was anything above 660. Then it jumped to 680, 700 and now finally 740.”
The situation is frustrating for John Scaffidi, owner of Complete Mortgage in Sussex, Minn. “There’s no common sense anymore,” Scaffidi said. “There’s nothing wrong with a 700 credit score. Every loan’s a battle, and everything is changing daily.” Credit Score RequirementsDespite efforts by Washington to ensure a steady flow of credit to consumers for home purchases, higher credit score requirements are making hard for mortgage brokers to close loans. The Miami Herald has an example. Protect Your ScoreThe best way to ensure a good credit score is to protect the score you already have. What is the best way to do that? – Don’t close credit card accounts. Credit card accounts add to the total amont of credit you have available. Closing the accounts down reduce the amount. Once is a while use the cards you have and pay them off — even if for relatively small amounts of money. Action on your card keeps the information flowing to the bureaus. – High balances are red flags. – Applying for more credit with high balances creates a credit score death spiral. – Fix credit report mistakes. There are often errors and mistakes on the average credit score. Review them and get them fixed. – Most importantly — pay your bills on time. Responsible Borrowers Turned OffUSA Today reports that credit card borrowers – even responsible ones — are being turned off by companies:
A new study by Fair Isaac, the creator of the FICO credit score, shows that 11% of U.S. consumers, about 22 million people, had their lines cut or accounts closed even though they pay their bills on time and have good credit. This is more than double the 5%, or 10 million consumers, who had blemished credit and saw their lines reduced in that same period, the six months ended last October.
The findings are surprising because historically lenders have pulled back on credit for risky consumers, rather than those with good credit. Yet lenders’ definition of risk is changing as the economy spirals downward, says Josh Lauer, an assistant professor at the University of New Hampshire who is writing a book about credit reporting. Lenders appear to be targeting high-credit-score borrowers for line reductions because they tend to use cards less and carry low balances, Fair Isaac’s Careen Foster says. Tightening ScoresTwo years ago, you could get a good loan with a credit score of 680, said Jeff Lazerson, president of Mortgage Grader, an online brokerage. Today, you’d better have a score of 700 — and if you want the best rates, a 740 and above. Having knowledge of your credit score is more important than ever before. |
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