Another credit crunch nugget

This is also from the Washington Post article mentioned 2 posts ago:

"Gonzalez of American Express said that in a typical year, fewer than 20 percent of its customers have their [credit] lines [a/k/a/ credit limits] adjusted. Of that proportion, 80 percent usually have credit increases, while 20 percent have decreases. In mid-2007, that shifted to a 50-50 ratio."

Some good news from the credit crunch

In checking out the Washington Post version of the story mentioned in the previous post, I came across this paragraph:

"Fewer consumers are now getting courted. According to Mintel Comperemedia, a marketing research firm, 1.34 billion credit card direct mail offers were sent out in the third quarter, down 13 percent from the previous quarter and 28 percent from a year earlier."

Those figures are for the States, but it is a tell-tale sign of the changes. (The previous paragraph mentioned that credit-score cutoffs for direct-mail offers have been raised.)

Change in treatment of credit card usage

A few weeks ago in Business Week there was a short item explaining that, in the U.S. anyway, the point at which credit card utilization is penalized has moved from 35% to 20%. (And I don't think people realized that it was as low as 35% originally.)

I haven't been able to verify if this change has also been made in Canada, but would be surprised if it doesn't come north if it hasn't already.

A lot of people prefer a particular credit card, whether for points or cash back. There is no problem with that; I just hope you aren't hurting your credit score.

What goes into my credit score?

The factors that go into your credit score, and the percentage weight of each are as follows:

• Payment history (35%) - Indicates whether you have made your credit card payments, loan payments and other payments on time. Even making one payment after the due date can cause your score to drop by as much as 20 points.
• Amounts owed (30%) - Compares how much you owe to your credit limits with various lenders.
• Length of time in file (15%) - Indicates how long you have had credit accounts. Typically lenders want to see three "trade lines" that have been open for at least a year.
• New credit (number of inquiries) (10%) - Shows how often you are looking for new credit and how you handle accounts you have recently opened
• Type of credit (10%) - Considers the type of loans you have - car loans, lines of credit, credit card balances

By the way, the score will be in the range of 300-900. If you are at 720 or above, you will likely qualify for the best mortgage rates. As your score declines, you pay a higher rate. If you are below 500 or so, you will not likely to be able to get credit, unless you have great equity, and even at 500, you will be paying an additional 3.5-4 % in interest.

It is advisable to check your credit score at least once a year. (Statistics say that 70%+ of credit reports include errors, and they usually aren't in your favour.) You can get a mailed copy of your credit report (without your credit score) once a year. Info is available at Equifax (www.equifax.ca), TransUnion (www.transunion.ca), Northern Credit (www.creditbureau.ca).