The credit card industry seems like a one big scam to me. Why should we even use credit cards or have a FICO score that's scored through arbitrary means when credit card companies keep changing the rules of the contract and how they measure FICO scores?
I recently read about how banks using our taxpayer money are now changing the terms of their credit card rules by raising interest rates on people with excellent FICO scores.
Here's why: When lenders lower credit limits, the amount of credit available to consumers is reduced. That increases the percentage of credit that borrowers are using compared with what's available — often hurting their FICO credit score. Lenders use FICO scores, which range from 300 (worst) to 850 (best), to determine how much credit to offer consumers and at what rates.
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Take Mary Craig, 26, of Ashburn, Va. Shortly after American Express lowered her credit card limit by 60%, to $7,200, Craig's credit score dropped from a decent 720 to a mediocre 683, she says. She applied for two loans in recent months, unsuccessfully, and worries that even if she got one, she wouldn't get the best rate because of her credit score.
It's a stinging setback considering that Mary and her husband, Sean, 32, have spent years improving their credit score so they could get a bank loan to consolidate $17,000 in card debt. When she called the bank, a rep told her she'd have to boost her score to 750 to get her limits raised.
It's a no-win situation, she says, because, "How can I increase my score to 750 when (the bank's actions) have no doubt damaged it?"
Why should we continue this usurious practice of credit cards? The FICO score really isn't a reliable arbitrator of who's worthy of a mortgage loan or a car loan when that FICO score's so easily affected by the actions of banks in changing the terms of the contracts and lowering the credit lines. Maybe we should look at an entirely new way of doing business in this country, to where credit should only be extended to small businesses, and the use of a downpayment to judge a person's standing for a home mortgage rather than the FICO score.
There's this simple adage that I live by----living within my means, and saving up for an emergency fund if I can't find a job after my current temporary one ends so that I can have about four months or so banked away for the rent and bills in that situation, which I am doing now although it's hard with student loan payments, rising utility bills and the huge hike in grocery prices. Any time I think about getting a credit card, I remember the old family story of my great-grandfather cutting up my great-grandmother's credit cards because he was tired of the ever-changing interest rates.
So, why should we even keep credit cards? Let's change our way of thinking on this.