Borderline Credit Scores Equal Less Credit Opportunities

In February 2010 new credit card regulations will go into effect.  The results may vary but it seems like a strong possibility that those with borderline credit scores may find it much harder to get access to credit. 

New credit card regulations taking effect have changed the credit landscape dramatically.  Opportunities for low credit score applicants may very well decline even further and those who utilize plastic on a daily basis will have to play the game a different way.  Part of the recent financial woes in the U.S. and around the world can be at least partly attributed to the credit give-a-way that has been ongoing for years.  Lenders and credit card companies were, quite literally, issuing credit to just about anyone with a wallet.  The question of whether or not they could pay their credit card bills seemed to hardly enter the equation. 

Credit card traps have existed from the very beginning of their issuance and use.  Credit card companies have always found a way to reel in the consumer and squeeze consumers for more money at every turn.  The new regulations will eliminate some of the common traps that have haunted consumers for years.  However, this will hardly stop the card issuers.  They are hard at work trying to find new loopholes and developing other dubious traps to work around the new system.  One thing is for certain; credit card companies will have their hands tied after February 2010 when restrictions will prevent them from pursuing one of the most popular traps of all:  jacked up interest rates. 

New Interest Rates Regulations

After February 2010, if you the consumer obtain a new card it will be very difficult for the issuer to raise your interest rates during the first year.  The only way this can happen is if you the consumer fall 2 months behind in your payments.  Now, after that first year is completed the issuer has the right to increase the interest rate but only on new credit card purchases.  Card issuers will not be able to increase your interest rate when you fail to make payments with another lender as long as it applies to past balances.  However, they will be able to increase your interest rates on transactions completed in the future if you fail to pay those lenders on time.  If the consumer does get 60 days behind and the result is an increase in interest rates the issuer has to lower the interest rate once again if the consumer can make their credit card payments on time for six months straight.

What Does It All Mean?

The credit companies are running scared in regards to the pending new regulations.  They are on a mission to make as much money as possible before February 2010.  They are fast reviewing many of their customer accounts and dropping them left and right.  Those who once had endless lines of credit have realized that the well has gone dry.  Some credit card companies are even toying with the idea of raising the minimum required payment significantly.  The issuers have rewritten the formula so that they are receiving 5% instead of 2%.  This means if you have a $1000 balance you could be paying $50 a month instead of $20.  The credit card companies know the times are changing and they want a return on their money and they want it quickly.  A few years ago a credit score of 650 may have gotten the consumer even a prime credit card offer rather easily.  Nowadays, a FICO score of 750 or better will typically be required for the best prime rate credit card offers.

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This entry was posted on Friday, October 9th, 2009 at 5:16 pm and is filed under Credit Card News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.