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2008-11-27 03:47:58

How to Protect Your Credit during the Recession?

Markets go down and economic anxiety index goes up. More and more people are highly concerned about the current economic situation, as credit providers hike interest rates and cut lending limits on most accounts. The so-called "revolvers", holders who carry their balances over time, used to be banks' most desirable clients. And, oddly enough, now these borrowers are being hit most during the credit crunch. Although the federal funds rate is just 1%, holders see their rates increasing and their spending limits slashed. Learn how to protect your credit during uncertain economic times!

This mass anxiety, which seems to be everywhere, can make consumers act in an unusual manner, they run to extremes. Psychologists say they've never seen it this bad. Some people overspend, as they fear to lose all their money, the others are so stressed that they stay home from work. For customers, it's hard to accept this harsh reality and they try to escape it in every possible way.

It's definitely hard to stay afloat when your lenders increase your interest rates and fees, your lending limits are being cut and your credit debt is accumulating fast. Major credit companies increasingly hike interest rates by two or three percentage points. For those holders who pay off their balances regularly, this change will be of no great importance and they hardly feel this pinch.

If you pay in full but charge big amounts each month, lenders may slash your lending limits. 20% of banks lowered lending lines for their clients, including their best customers. So, you'd better check your monthly statements carefully to be in the know of the current changes, so that you can protect good credit. Once you know your limit for sure, you can estimate the amount of money you can spend without maxing out your cards.

As for balance-carriers, they're experiencing more troubles - carrying a balance on a high-rate card is not an easy task even for the responsible user. If your interest rates have jumped high, you can opt out of higher interest rates and pay off your balance at the current interest rate. For this, you should contact your issuer or send a letter. In most cases, opting out means that you stop making purchases with this card, bust some companies allow their customers to shop until its expiration date. Again, check your monthly statements carefully, as even some insignificant changes in terms could end up in financial troubles.

Good news is that you can find a better deal with better terms if your FICO score is good. Judging by the experts, it must be of about 700 and higher. Although average credit card rates rose between mid-October and November, average rates are still lower compared with the same period last year.

Evaluate your current financial situation - determine how much you earn and how much you owe, make a list of regular expenditures and your income. Try to figure out what is necessary and what is not. By doing so, you can see your problems clearly if there are any, and find the right solution or your case.

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