Focus on paying off credit-card debt, not credit scores

I just finished the article of You owe it to yourself by Chuck Jaff. I totally agree of what he said about credit scores.

Credit scores is not only a measurement about the ability of one can replay what he/she borrow to spend, it is also a trick that get someone to spend. People may think they can use the credit card to purchase and replay the entire amount later, but most of customers don’t. They usually pay a little and left the rest for the next amount and letting banks to earn the interest as high as 13%-25% or more. The better the score, the higher the limits and lower the rates, but it is not anymore. Even with the perfect credit score, banks still hikes your card rates. Related post: Outrage: Citi Raised Rates On Up To 15 Million Cardholders!!

“”Consumers have a tendency to focus on the nuances of credit scoring and often lose sight of the bigger picture,” said Greg McBride, senior financial analyst at BankRate.com.

“They are so worried about something hurting their credit score — particularly in an environment like this one where lenders are tightening up and making it harder to qualify — that they are willing to live with bad terms that they never would have agreed to in the first place,” he added.

“Too often, I have heard consumers come at this from the angle of how it impacts their credit score rather than the angle of ‘How much money can I save in interest charges and how quickly can I pay off the debt?’” McBride said.

“Somebody who is looking at an interest-rate hike where their rate is going, say, from 10% to 18%, they could easily save themselves $1,000 in interest if they have a balance of several thousand dollars,” he added. “Their best move is keeping the lower rate, letting the account close and paying off the debt, which will in turn help them get another credit card if they need it.” ”

“Some people are so busy protecting their credit score that they are losing money to do it, and the savings could also help their bottom line, which would in turn help their credit score over time.”

This is true, but there are ways credit card companies get people to focus so much on credit scores. Some companies send advertisements with fabulous deals that people apply for. When these card companies look in on the credit history they deny everyone but the very best applicants. The losers then end up with a worse score because of excessive companies looking into their credit history. If you dont get the better deal your credit score can suffer and keep your current rates higher. If your paying 25% beware of those offers of 8.99%. If you apply for a bunch of those it could lower your score. This is wrong and should be addressed. In my situation I talked with my bank and got a line of credit that was cheaper and I consolidated. I’m not totally satisfied but am paying less than I was. Now that my balance is down I’m not getting those great offers anymore but contemplating going to a credit union. Anybody with any input on this type of situation please feel free to reply.

Interesting stories from a cardholder (or a victim) :

“I don’t know if it is coincidence or what. I always pay off my credit card each month and do not run a balance. I was relaying this story to a friend earlier today and she, like I, pays her balance each month. She just called me to tell me the exact same thing happened to her. I have a Capital One Visa. I’ve had it for over 5 years. They have always sent me a new card when my card has neared its expiration date. Today I tried to use my card and it was not accepted. I looked at the expiration date and it was 6/30/09. I called Capital One to see why I didn’t receive a new card. At first I was told that they don’t automatically send a new one out. When I told them that they always used to, they changed their story and said it must have been a glitch in their system and they would send a renewed card out to me immediately with the same terms and conditions. I thought perhaps the credit card companies are trying to get rid of customers that pay in full without any interest charges, but dismissed this as my paranoia. Now my friend called to tell me the exact same thing happened to her when using her Citibank card. It was rejected today and the expiration date was 6/30/09. Coincident? Or has anyone else had this happen?”

Related Posts:

• How many of the ARMs and Alt-A’s have refinanced their homes at lower rates already?
• After 25 years in the Mortgage business I can act as an expert on credit scores and reports.
• Delinquency rates increasing on credit cards, is this a ANTI GREEN SHOOT.
• No Kidding: “The only thing missing from the party is the U.S. worker and consumer. ”
• Outrage: Citi Raised Rates On Up To 15 Million Cardholders!!

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