Credit Cards and Credit Reports
http://creditfederal.com/article/articles/405/1/Credit-Cards-and-Credit-Reports
By CreditFederal.com - A good or bad credit personal loan, auto and mortgage financing, and credit card resource.
Published on 12/6/2007
Certainly credit report scores decide if you get approved for a credit card and the interest rate you will pay, but what about future rate changes?
Credit Score Changes Impact Active Accounts
It's common knowledge that credit report scores determine whether or not you'll get approved for a credit card and; if so, what will be the interest rate you'll have to pay. But not many consumers are aware that the rate they were given when they first received their card, is not a fixed rate even though the card claims to be a fixed interest rate. Changes to the cardholder's credit report score can impact the credit card interest rate, even when those credit score changes are due to other accounts not related to the card, such as loan repayments or payments to other cards.
Your initial credit card interest rate is determined by your creditworthiness. Creditworthiness is typically represented by a FICO score, a system developed by Fair Isaac (FIC) that is designed to predict the likelihood of default in the near future. FICO scores are generated by credit bureaus such as Equifax (EFX) based on a mathematical formula from Fair Isaac.
People with heavy debt and low income score receive bad credit scores, as do people who regularly make late payments on any of their reportable debts.
And there are other factors which can result in bad credit report scores, such as high balances on credit cards, as well as applying for credit cards even if you don't end up using those cards because they could be indicative of risk.
There is proposed legislation to prevent credit card companies from applying rate increases to debt incurred prior to the increase and require that consumers consent to rate increases before being implemented.
But congressional efforts to make credit card companies discontinue interest rate increases due to credit report score changes is encountering opposition from the banking industry.
Some credit card company executives feel cardholder credit report changes affect their underlying costs and risks and they need to be able to adjust interest rates accordingly. They also state card holders are notified of any changes, given time to opt out and pay off the card at the old rate, and to contact the credit bureaus whose reports may have spurred the rise in rates.
Consumers have other options, they added, such as contacting their credit card company and making new arrangements that might include fee waivers and new payment schedules.
Your initial credit card interest rate is determined by your creditworthiness. Creditworthiness is typically represented by a FICO score, a system developed by Fair Isaac (FIC) that is designed to predict the likelihood of default in the near future. FICO scores are generated by credit bureaus such as Equifax (EFX) based on a mathematical formula from Fair Isaac.
People with heavy debt and low income score receive bad credit scores, as do people who regularly make late payments on any of their reportable debts.
And there are other factors which can result in bad credit report scores, such as high balances on credit cards, as well as applying for credit cards even if you don't end up using those cards because they could be indicative of risk.
There is proposed legislation to prevent credit card companies from applying rate increases to debt incurred prior to the increase and require that consumers consent to rate increases before being implemented.
But congressional efforts to make credit card companies discontinue interest rate increases due to credit report score changes is encountering opposition from the banking industry.
Some credit card company executives feel cardholder credit report changes affect their underlying costs and risks and they need to be able to adjust interest rates accordingly. They also state card holders are notified of any changes, given time to opt out and pay off the card at the old rate, and to contact the credit bureaus whose reports may have spurred the rise in rates.
Consumers have other options, they added, such as contacting their credit card company and making new arrangements that might include fee waivers and new payment schedules.