The Crisis and Your Credit Cards

Over the past few months, we have seen a huge change in the financial world. Loans are suddenly difficult to get, jobs are tough to find, and credit is hard to come by. The global financial crisis is making life very difficult on the consumer. Anecdotally, a friend of mine, with a 740 credit score, was unable to get a credit card with more than a $2,000 limit. If someone with a 740 credit score (well above average) can't get a decent credit card, what hope do the rest of us have?

Economists have even been theorizing that the next crisis will be because of credit cards. The New York Times writes:

"First came the mortgage crisis. Now comes the credit card crisis. After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers."

Almost all credit card companies are dropping or decreasing their promotions, tightening their standards, and making the credit process a lot more difficult for consumers. So why is credit important? At some point in your life, you will probably need to take a loan, a mortgage, or prove that you are trustworthy. In all of these situations, a decent credit score is extremely important.

Keeping your credit score high

Especially during a crisis like this one, keeping a good credit score is imperative. So, what should you do to boost your credit rating in a period of economic unease?

1. Check your credit report

The first thing you should do is get hold of your annual credit report, to make sure that all of your accounts are in check. You can do this for free, once every year, from annualcreditreport.com. From there, you can check your credit report at the three different credit-reporting agencies (TransUnion, Equifax, Experian). Note: You will only be able to see your credit report, not your actual credit score. You can see your credit score by signing up to a service through one of the agencies. I use TransUnion, which for $15/month updates me daily on my credit report and monthly on my credit score.

2. Pay on time

Make sure you always pay your bills on time. This is the most important step to improving and maintaining a good credit score. Paying on time is important, but so is keeping your debt load low. This means that you should NOT max out your credit cards. Lenders will see that you are close to your maximum on your credit cards, and they will deem you as a higher risk than someone who keeps their credit cards in check.

3. If you don't have a credit history, get a credit card

This applies to me currently: I cannot get very high limit credit cards because I am a student, and I have a limited credit history. In this case, I recommend that you open a credit card and take very good care of your account. Of course, as I mentioned earlier, now is a difficult time to get credit cards, so you may need to look into student credit cards or secured credit cards. Speak to your bank or check out creditcardguide.com to see some credit card offers that may help you.

If you follow these steps, and you manage not to spend too much during this current crisis, you might find yourself with a better credit rating by the time the economy begins moving upwards. Believe me: you will thank yourself for keeping your credit score high. Paying your bills on time and maintaining good credit is worth the time it takes.