Around 2008 - 2010, because of all the trouble and financial difficulties experienced
by so many American financial institutions, especially banks, the
Federal Government " bailed out" the banks, but created a completely
different set of rules and restrictions that banks and lending
institutions had to abide by. These rules attempted to control how banks
charge interest on credit cards, while trying to free up monies by
pumping dollars into the ailing system. Like many good intentions,
especially when politicians tweak the plan to get it approved and then
delay implementation, most credit card issuers had sufficient time to
figure out how they could abide by the new restrictions that were
supposed to protect consumers, while "ripping off" many consumers in
other ways, to maximize their institutional profits. On the banking
side, this has resulted in the elimination of certain fees that were
previously charged, while making it back on other items. Some of these
include record low interest paid on interest bearing accounts, while
gradually and continuously moving interest rates charged on loans and
credit cards up. In addition, most of the larger financial institutions,
instead of using the influx of capital to free up loans, etc., which
was the supposed intent, instead stiffened appraisal requirements on
mortgages given, and demanded higher credit scores to qualify for the
best rates, or in some cases, any loans at all. While there have been certain tweaks, our Credit Rating system is often quite misleading, and while certain things disproportionately might bring down one's credit number, others do not have as large an impact! Today, one needs a rating of approximately 750 or better, in many cases, to get the best rates, and in some cases, to even qualify for credit. That number is generally considered excellent, from about 660 - 750 is consider good (or OK), about 625 is satisfactory/ fair, and those with lower credit ratings often find it challenging to buy a car, qualify for any loan, etc.
In addition, while this was occurring, most of the credit card issuers took the opportunity to reduce many credit lines across the board. Since, in the complicated way that credit scores are calculated, a major factor is the ratio of credit card account balances in relationship to credit lines, with a lower percentage being preferable and securing a better score. Therefore, let's assume that an individual had five credit card accounts, each with, for example, a five thousand dollar line of credit ($5,000). That would mean that the total on these five accounts would be twenty five thousand dollars ($25,000). Hypothetically, let's assume that each account had one thousand dollars as a balance ($1,000) or a total of five thousand dollars ($5,000) balance. This would mean that the individual had used twenty percent (20%) of the available balance, an amount that would ordinarily be deemed as a good ratio, and would contribute to a better score. Now, let's assume that these five accounts all had there credit limits reduced in this across the board move to three thousand ($3,000), or now that the total credit limit would be fifteen thousand ($15,000) instead of the prior $25,000. Now, understand that since this was an across-the-board move, it was often unrelated to an individual's credit worthiness, but the ratio of credit used to credit limit would now be raised from 20% to 33.33%. Obviously, this higher ratio would have a detrimental impact on credit ratings, and in many cases, resulted in a reduction in an individual's credit score. Then, to further complicate the issue, many banks send out "lower interest rate" offers (for a limited time), which then entices someone to "borrow" more, which then triggers an even lower credit rating, and often then triggers a further reduction in one's credit limit, which then creates a "domino" effect, of further lowering one's credit rating.
Many individuals who pay their bills on time, and whose financial circumstances have not changed dramatically, have thus witnessed their credit ratings dropping during this period. To make matters worse, many banks then require higher than previous credit ratings to secure "best rate" loans. Obviously, what the politicians thought would help consumers, has in many ways had the opposite impact.
In addition, while this was occurring, most of the credit card issuers took the opportunity to reduce many credit lines across the board. Since, in the complicated way that credit scores are calculated, a major factor is the ratio of credit card account balances in relationship to credit lines, with a lower percentage being preferable and securing a better score. Therefore, let's assume that an individual had five credit card accounts, each with, for example, a five thousand dollar line of credit ($5,000). That would mean that the total on these five accounts would be twenty five thousand dollars ($25,000). Hypothetically, let's assume that each account had one thousand dollars as a balance ($1,000) or a total of five thousand dollars ($5,000) balance. This would mean that the individual had used twenty percent (20%) of the available balance, an amount that would ordinarily be deemed as a good ratio, and would contribute to a better score. Now, let's assume that these five accounts all had there credit limits reduced in this across the board move to three thousand ($3,000), or now that the total credit limit would be fifteen thousand ($15,000) instead of the prior $25,000. Now, understand that since this was an across-the-board move, it was often unrelated to an individual's credit worthiness, but the ratio of credit used to credit limit would now be raised from 20% to 33.33%. Obviously, this higher ratio would have a detrimental impact on credit ratings, and in many cases, resulted in a reduction in an individual's credit score. Then, to further complicate the issue, many banks send out "lower interest rate" offers (for a limited time), which then entices someone to "borrow" more, which then triggers an even lower credit rating, and often then triggers a further reduction in one's credit limit, which then creates a "domino" effect, of further lowering one's credit rating.
Many individuals who pay their bills on time, and whose financial circumstances have not changed dramatically, have thus witnessed their credit ratings dropping during this period. To make matters worse, many banks then require higher than previous credit ratings to secure "best rate" loans. Obviously, what the politicians thought would help consumers, has in many ways had the opposite impact.
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