Fed Survey Finds Credit Card Standards Tightened in Third Quarter
If you want to get an idea on how lenders are predicting the economic future, look no further than the most recent survey from the Federal Reserve. Specifically, the survey noted that banks and credit card companies got stingy when it came to consumers opening new lines of credit in the third quarter of this year, something that typically happens during times of economic uneasiness. In fact, according to the survey, the underwriting standards for credit card approval have increased to a point that hasn’t been seen since 2009, and we shouldn’t need to remind you of the fragile state of the economy a decade ago, at the cusp of this generation’s great economic recession.
So what does this Fed survey indicate, exactly? In layman’s terms, it means that if you want to open a new line of credit, your credit score had better be in really good standing. In fact, the Fed survey specifically indicated that it’s gotten a lot harder for consumers with credit scores under 620 to get approved for new lines of credit compared to what it was at the beginning of the year when there was much more confidence about the economic outlook. The bottom line is that if your credit isn’t in good standing, banks are going to worry about your ability to pay back any loans or lines of credit that you’ve opened now in uncertain times than they would in prosperous economic times. As a result, they’re going to be more stingy about what they approve. And while we always recommend taking the appropriate steps to make sure your credit is in good standing, it’s going to be arguably more important than ever in the near-term if banks continue to tighten the strings on the money they hand out. The good news is that if your credit score is in good shape or you work to ensure that it’s in good shape, you’re likely to benefit from reduced interest rates.
Cómo mejorar su puntaje crediticio
Even if your credit score isn’t below the 620 mark that we indicated above, it always behooves you as a consumer to take the necessary steps to improve it. Here’s a look at how you can get improvement fast so that you’re not on the outside looking in if you need to take out a loan or line of credit down the road:
- Keep balances low on existing credit cards: Keeping balances low on any revolving credit that you have (i.e., credit cards) can help improve your score. Generally, expect your score to be highest if you’re at or below about 30 percent of your credit utilization rate. For instance, if your credit card has a limit of $1,000, you want to carry a balance of no more than $300 for the best possible credit score.
- Ask for an increase in your credit limit: To piggyback off the above point, if you’re eligible for a credit limit increase that can help out your credit utilization ratio and thereby improve your score, consider taking it.
- Check your credit report: This gives you an idea of where you stand and what needs improvement so you can come up with a plan of attack. It can also help you identify and dispute any inaccuracies that may be present on your report.
- Negotiate away: Have outstanding balances or debt that’s gone to collections? That can really hurt a credit score. Try negotiating with the lender to settle any debts so that they appear more favorable on your credit report.