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Credit Card Debt – Watch Your Credit Report And Your Bill
By: Charles Essmeier
Most consumers are aware of the importance of their credit report. This
document, offered to consumers and lenders by the three major credit bureaus,
offers a fairly complete list of financial transactions and debts incurred by a
consumer. Lenders examine the report, along with the associated FICO score, to
determine whether a consumer is worthy of receiving additional credit or loans.
What many consumers may not know is that credit card companies regularly check
their credit reports, and unfavorable entries may result in a higher interest
rate on their credit cards.
We have previously noted that many credit card companies employ something known
as a “universal default clause” in their terms of service. This clause allows
the company to raise interest rates on the customer’s card if the customer pays
bills late. A late payment to the phone company could result in a higher
interest rate on the Visa card. Most companies also allow themselves the
latitude to raise their customers’ interest rates for any reason at all. With
this in mind, the credit card companies tend to run occasional credit checks on
their customers, often raising rates if they notice any activity that, in their
opinion, makes the customer a higher risk. This might happen even if the
customer has a history of paying his or her credit card bills on time.
The sorts of things that may create a “risky” client include taking out
additional loans, additional credit cards, or building balances on existing
cards to at or near their limits. The companies justify this activity by saying
that consumers who do these things create greater risk for the lender, and these
costs must be passed on to all of their customers. The problem for the customer
is that these higher interest rates are often assigned without warning. The new
rate applies to existing balances, too. An interest rate hike today could mean
that the television you bought last fall has suddenly become more expensive.
What can consumers do? Keep an eye on your credit card bill and your credit
report. You can receive a copy of your credit report, for free, at
http://www.annualcreditreport.com. As for your credit card bill, watch the
interest rate. If it abruptly changes to a higher rate, call your credit card
issuer and ask them about it. They will often reduce the rate if you call and
complain. If not, your only option may be to shop around for another card.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com, a site devoted to debt consolidation and credit
counseling. |
