Your Credit Report Affects Your Cards

If you carry a balance on your credit card from month to month (which I strongly feel should not be done if possible), be extra careful about negative items hitting your credit card.

In the past, credit card companies would raise their interest rates to a card user who misses a payment or two. Missing payments may have been the only reason these companies penalized their customer. Now, according to MSN Money, users will be penalized not only for missing payments to that credit card, but for missing payments to other credit cards.

That’s not the end of it. Credit issuers routinely look at their customers’ credit reports. Any new negative item sends up a red flag, and the issuer might decide to use that as an excuse to raise their interest rate, effectively deciding that the offending person is a higher risk to the company.

This means that if you, for example, miss a payment on your Bank of America car loan, MBNA may penalize you by raising their interest rate from 11.9% to 25.9%. Here’s another example: If you seek approval for a mortgage and it shows up on your credit report, any number of credit card companies may decide that since you are about to purchase a house, you may have less money to put towards credit card debt, increasing risk.

The best plan is to pay the entire balance of your credit cards off each month.

From the article, here are the reasons credit card issuers may raise your rate, with the percentage of banks actively using that particular information:

* Credit score gets worse: 90.48%
* Paying mortgage, car loan or other creditor late: 85.71%
* Going over credit limit: 57.14%
* Bouncing a payment check: 52.38%
* Too much debt: 42.86%
* Too much available credit: 33.33%
* Getting a new credit card: 33.33%
* Inquiring about a car loan or mortgage: 23.81%