I knew it was bound to happen, but I’d been hoping that somehow I’d avoid it. Despite having excellent credit and no debt, we got a letter from one of our credit card companies dropping our limit from $10,000 to $300. This was done because of “inactivity” on our account, which really translates into the card company having way too much open credit on its books and needing to drop the excess.
This was our “B” card for use in an emergency, in case of loss of the “A'” card, or if we should find ourselves somewhere where the “A” card isn’t accepted. Regardless, $300 does us no good. We can’t travel with a limit like that or even buy the monthly necessities. So we canceled the card. We didn’t want to because it was one of our older cards and we knew our credit score would take a ding because of it. But the score already took a dip when they dropped our limit because our available credit dropped. Canceling the card ourselves was better than letting the card company cancel it, which I figured would probably be the next step. We rarely used the card anyway because it had a lousy rewards program so other than the ding to our credit score and the loss of our backup card, we haven’t really lost anything. But it’s still annoying to say the least.
After we canceled the card, we applied for and were given another card with a much better rewards program. We have a “B” card again. But the credit score took another ding because we had to apply for new credit, which we wouldn’t have had to do if the other bank hadn’t, frankly, screwed us.
Even those of us who don’t carry any debt aren’t immune to the havoc this economic crisis has wrought. Even though I don’t intend to get any loans, my credit score is still important to me. My insurance rates are determined by that score and if I ever have to go get a “real job” again, an employer can use the score to evaluate my employability. Granted I’m a long way from deadbeat territory, but it’s irksome to have my score drop because of things that were not in my control. I played by the rules, did everything right and still got burned.
I’m worried now that I’ll have to repeat this process in the not too distant future, with more dings to the credit score. Our “A” card is with a major bank that has been shutting down cards and slashing limits like crazy. So far we’re safe, but how long before our luck runs out? I wonder if I should go ahead and apply for another card just so I have another “A” card in the wings. Or should I wait until I’m forced to act? Will applying for these other cards cause this other bank to freak out and drop my limit or cancel the card? Will it look like excessive use of credit? If I wait, will I just have to hope they don’t drop the bomb in the middle of a vacation when I really need the card? I have no answers, but these are the things I find myself wondering about these days.
I never used to worry about my credit. I knew I had outstanding credit and I had my cards all in place. One for regular use and a backup. No debt. I was all set. Beyond checking my reports for accuracy and identity theft, I left it alone. I haven’t applied for new credit in years and my credit score has remained stable. Now I’m forced to mess with things I thought were long taken care of. I’m having to worry about getting new cards, canceling old ones, and trying to judge the damage this is doing to my credit score. I’m having to try to second guess the banks and FICO to figure out whether or not I’m making things better or worse for myself. Am I being proactive and protecting myself as a consumer if I get another card for “just in case” or am I opening myself up to more financial headaches? And down the pike it looks like I get to look forward to annual fees and deciding whether to pay up or change cards (yet again) since more cards are going down that road to generate more revenue. Credit cards are becoming a big pain in my butt, and I don’t even carry a balance. I feel for those that do.
Believe me, if I could live without a credit card I would. However, you basically can’t travel without one. You can’t rent a car without one and the holds put on by most hotels and ticket providers make debit cards almost impossible to use. I refuse to use my debit card online or keep a huge PayPal account, so I need my card to shop online. I also value the purchase protection and protection against fraud that you get with a credit card. So I’m stuck with a necessary evil and I’m stuck trying to figure out which direction to go in. This is not something I, as a debt free person, ever gave a lot of thought to before.
I only hope that, since the government sort of started this by enacting legislation regulating credit cards (which the card companies are trying to get around now, thus the rash of rate jackings, limit drops, and card cancellations now before the laws go into effect in January), someone steps in and changes how the FICO score is computed. It isn’t a model that can work or remain accurate as long as it reflects things that the consumer has no control over. When your limits drop or your cards are canceled and you’re forced to apply for new cards because a bank decided to drop you and not because of anything you did, you shouldn’t be punished for that. Or, if you’re going to be punished for it, insurers, landlords, and employers shouldn’t place as much emphasis on such a flawed scoring model.
Intellectually I knew it all along, but now I’ve seen personally how this crisis affects everyone, debt free or not. No one is immune to this crisis and it will change the way we all deal with credit going forward. Even the debt free have to worry about where this is all headed and what to do now. We all have to think about things we thought were set long ago and the impact our actions have on our futures. It’s not our fault, but it’s our problem.